Rail privatisation was supposed to have taken the politics out of the railways. Well, that was never going to happen but the decision by Patrick McLoughlin, the transport secretary, to prioritise the refranchising of East Coast shows that for the government political considerations still outweigh the efficient running of the railway.
There were numerous good reasons not to rush through the reprivatisation of East Coast which has been run by the government owned Directly Operated Railways since 2009. It was taken over by DOR because the previous incumbent, National Express, had thrown the towel in, having overbid and found itself caught up in the 2008 downturn (and incidentally, complaining that it was not getting enough in compensation because Network Rail was doing its job too well!). Although the then Transport Secretary Lord Adonis said this was only a temporary measure, the rebranding of the trains and the appointment of experienced rail managers suggested that there would be no hurry to relet the franchise.
Indeed, since the franchise has been well run – despite problems with the catenary that clearly are no fault of the operator – there was no urgency about reletting it. There have been notable improvements. The first class service has been revamped and the food, as I found on a recent trip from Edinburgh to London, is better than the rather meagre fare on offer on Virgin. Passenger numbers have increased steadily and the company has proved popular with staff.
Secondly, DOR has performed well financially. Not only has it made a small profit (in truth a rather meaningless number since it is subsidised through the block payment made to Network Rail) which is reinvested into the railways but it has paid over more than £600m in premium payments in the past three years.
Moreover, there is an excellent reason to keep a franchise in the public sector, even if for those extreme ideological neo-liberals. The cost of running trains is very difficult to ascertain and having one operator to use as a benchmark would be very helpful for the Department for Transport, especially in the light of its recent difficulties with the West Coast franchise.
When I confronted Simon Burns, the rail minister, on The Daily Politics Show with the point that this was being done for purely ideological reasons, he blustered that it was to give customers a better deal and that Directly Operated Railways (a name he could not actually remembered as he kept getting it wrong) was not paying as much in premium payments as Great Western. That was the sort of nonsense that ministers are briefed by their civil servants and repeat without understanding what they are saying. In fact, it was a silly comparison since GW has several times more passenger than East Coast and, indeed, has been in cap and collar arrangements for some time, meaning much of the premium has had to be paid back to the company. And, of course, GW did not go ahead with its three year extension because it would have required the payment of premiums it could not afford.
What makes the decision to rush through the East Coast deal all the more galling is the fact that the Department has no shortage of other franchises to contend with. The March announcement on franchising resulted in the postponement of most of the franchise bidding processes for several years – not just months – because the Department cannot cope with the workload, giving the existing operators extensions for which they will be in a strong position to negotiate good deals. There is a backlog that is having a damaging effect on the industry, creating uncertainty and stopping investment. Yet, instead of drawing the obvious conclusion and letting franchises where the alternative is giving incumbents long extensions, what do they do? Rush through the one that is functioning fine and which requires no negotiation since all the money reverts to the Department. The only conclusion to be drawn is that the Department is driving through the East Coast deal because ministers do not like seeing a successful state owned franchise, especially given it would still be in state hands when Labour took over if they win the next election
The final reason why this is such a bad idea is the effect on staff. A guard wrote to me – obviously anonymously – pointing out that the uncertainty that will be created by this process will undoubtedly have a negative effect on passengers. He said he will now be getting his fifth uniform in eight years and ‘We will now have two years of uncertainty till the new incumbent takes over. Words on maintaining service quality etc. will be issued but the managers will be looking to securing their futures.’ He added: ‘It’s all rather depressing. Political expediency getting in the way of common sense. It will be ironic if a new government scraps this stupid, costly and inefficient franchise system leaving East Coast one of the few franchises’.
Interestingly, a big hole has been blown in the argument about the government not being able to take back franchises permanently, an idea that hopefully Labour will adopt when it finally comes out with a new policy on franchising. At the time of the takeover of the franchise by DOR, Labour ministers were implying that it would have to be temporary because of EU rules. Then last year when the West Coast bidding process collapsed and Virgin was going to retain the franchise temporarily, at first ministers said here would have to be a temporary franchise of a year, followed by an interim franchise while the long term contract was prepared for the permanent one which would have been let, probably , after the general election.
Lo and behold, that crazy idea soon got forgotten and there proved to be no need for an interim franchise. Instead, Virgin were given an extension on West Coast until November 2014, but then in the announcement on the franchising timetable in late March, Virgin were given a further extension to April 2017. Therefore, rather than ending last December as it was supposed to, Virgin, without any competition, will have received an four and a half years – almost a third extra on their original deal signed back in 1997. No mention, here, of EU rules, tendering, competition, or accountability.
Indeed, the announcement on the new timetable represents the most abject acceptance of the utter failure of the whole franchising concept since the system started in 1996. In fact, it seems to show that the rules are pretty much ‘make them up as you go along’. Let’s hope Maria Eagle, the opposition transport spokeswoman, is watching. There’s a lot Labour can learn from this callous disregard for the normal rules. They should be thinking: if they can do it, why can’t we?