East coast saga will run and run

Long time no blog as I have been moving house and it takes a month to sort out the broadband, once one has negotiated with BT and Orange. What a nightmare especially as I also missed the rail story of the year when I spent a week cycling in France at the beginning of this month.

I only have time to offer a few preliminary thoughts, and hopefully stimulate discussion. No matter since the East Coast saga will not go away for quite a long time. As I have written in Rail magazine and elsewhere, Lord Adonis certainly did the right thing in standing up to Richard Bowker’s attempt to bully him into a new deal. He has saved the franchising system in the short term but whether it is salvageable in the longer term depends on the depth of the recession. If the economy continues to head south, then passing on any new risks to the private sector will be impossible and a new form of franchising will have to be devised.

It is interesting that the SouthCentral franchise was let recently on terms that Adonis said were good for taxpayers when, in fact, it is pretty much impossible to work out whether this or is the case or not. The deal is not comparable with the previous one because track access charges have been reduced by an average of £80m each year and various other aspects are now different, such as the inclusion of Gatwick Express. I have tried to work out comparable figures and it seems that Govia have got themselves a pretty good deal, since its boss, Keith Ludeman, is reckoning on making £10m in profit this year.

The bidders for the SouthCentral were allowed to put in new bids on the basis of the recession, and therefore the contract must surely reflect that. That suggests that East Coast bidders will make far more modest bids than the £1.4bn in premium payments that National Express had promised to pay, blowing a big hole in rail finances. Unless Adonis can get his hands on some contingency funding, there is no doubt that cuts in rail services and investment will have to be made in the next year or so. However, the franchising system makes cuts in services very difficult to bring about because of the protacted negotiations that would have to take place between the operator and the DfT over dividing up the spoils from any savings. So watch this space, instead, for investment cuts.

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