There is a massive game of poker going on between the train operators and the government and so far neither is playing their hand very well. The operators are clearly in disarray. While ATOC’s insistence that they did not beg for more money when they went to see Geoff Hoon last week, it is clear that at some stage they will have to ask to renegotiate the contracts. Keith Ludeman, the boss of Go Ahead and a former chairman of ATOC, made this clear when he broke ranks just before Xmas by stating publicly that the franchise contracts were negotiable. That was not a message his fellow operators wanted conveyed, nor one ministers were prepared to hear.
The plot has thickened further with the news that Mike Mitchell, the civil servant responsible for the railways, told a select committee that there were several franchisees in difficulty. Although he claimed he could not name them in public – he did so in camera – because the information would affect the share price, since there are very few operators then it does not take a wizard in share dealing to downgrade the value of all five major operators.
The train operators, too, have rather given the game by producing a strategy paper, leaked last week to The Guardian, which says, as any fool could guess, that passenger numbers are set to fall over the next year. Add this to the statements from Ludeman and Mitchell, and it clear that the begging bowl is going to come out at some point in the near future. Then what? The government has said it will not negotiate although it is obvious that if several franchisees threatened to throw in the towel, it would have no choice.
From the rather unwise utterances from both sides, it is clear that neither side know how to play this game. Before doing an Oliver Twist number, they should know that we have been here before. As I mention in Fire and Steam in March 1867, after what is probably now the third worst banking crisis in history (after 1929 and 2008), a group of illustrious railway companies, led astonishingly by the arch Tory Sir Daniel Gooch of the Great Western Railway, who had hitherto rejected any hint of government interference in the railways, knocked on Disraeli’s door at No 10 begging to be bailed out. The great man turned them down. It is highly likely they will get the same response today.