Since the DfT announced that the Inter City East Coast (ICEC) franchise, run at present by Virgin Trains East Coast (VTEC), was going to end prematurely, politicians have been queuing up to claim that VTEC, or perhaps Richard Branson personally, have been “bailed out” to the tune of around £2 billion. In the vanguard of this claim-o-rama has been former Labour minister Andrew Adonis. The Great Man rather let himself go with his attack.
London's Kings Cross terminus, start of the East Coast Main Line
“Handing a cheque worth hundreds of millions of pounds to Richard Branson and Brian Souter [chair of Stagecoach] would be indefensible at the best of times but we are now at the worst of times with a Brexit squeeze on the public finances and with rail fares going through the roof … The cost of this bailout is going to be a slashing of the national infrastructure programme and even bigger fare rises” he claimed.
Also, Chris Grayling would have to go: “I think he is going to have to go because, as he is forced to defend a massive bailout to the private sector, the question will be asked by the public accounts committee and the National Audit Office - why didn’t you adopt the alternative course which was to set up state companies to avoid the need for a bailout? He has no answer to that”. But those with a little industry knowledge did.
Roger Ford of Modern Railways magazine was one of them (and if you want the detail, subscribe to his Informed Sources e-preview), as I told recently. As a result of Adonis generating plenty of heat but not necessarily much light, he has returned to the subject to inflict a little reality on all those shouting “bailout” from the sidelines.
Here’s what he has had to say: “The VTEC affair is being promoted by opposition politicians as the Department for Transport ‘bailing out’ Stagecoach and Virgin from their franchise commitment to pay ‘£3.3 billion’ in premia over the life of the franchise … Actually adding up the annual premia at 2014 prices I make the total £2.7 billion. But the important number is the total payable in the last four years from April 2019”.
Roger Ford - at the controls
There is more. “I put the premium payments for those last four years at £1.6 billion. This compares with the £1.1 billion which VTEC will have paid [my emphases] in the first four years to 31 March 2019. Thus, all this £3.3 billion stuff is typical political misinformation”. And the “£2 billion” claim seriously over-eggs the premium pudding.
“Then we come to the great bailout conspiracy. As I’ve been explaining … the premium payments for the second four years depend on VTEC being able to generate revenue growth from the more intensive higher frequency faster timetable which was due to be introduced from May 2019. As the franchise agreement makes clear VTEC will use its ‘best endeavours’ to deliver the timetable, but it still depends on Network Rail delivering”.
Now comes the crunch part: “At the moment all we know is that the infrastructure to support this timetable won’t be ready by May 2019. What parts of it will become available and when, no one seems to know … So it pretty obvious that, despite VTEC’s best endeavours, the premium profile is wrecked and there is nothing VTEC can do about it”.
Ford concludes “Even in the arcane world of political semantics, being ‘let off the hook’ through someone else’s shortcomings is not the same as being ‘bailed out’”. Quite. And after noting that Adonis claims he will involve the Public Accounts Committee, claiming “I am ready to share troubling evidence with the PAC and other parliamentary committees investigating the bailout”, he calls out the former minister directly.
Andrew Adonis - a mere passenger this time
“What this ‘troubling evidence’ is has yet to be revealed. It looks as though we are entering conspiracy theory territory here”. One doubts that Adonis will have read this verdict with anything over than the apprehension at being imminently exposed as having overreached himself to the point of ridicule. But Grayling did not get off Scot free, either.
And as for the ability of the DfT to set up new arrangements for ICEC by the appointed time, Ford is deeply sceptical: “The chances of setting up Chris Grayling’s new East Coast Regional Partnership by 2020 are on the emaciated side of slim, so I could see VTEC running the renegotiated Intercity East Coast franchise, possibly up to its full term”.
Shades there of the Team Shambles award I gave the DfT over the West Coast débâcle. But what this shows, once again, is that politicians - in this case those left of centre, but don’t think the Tories don’t indulge in the same kind of attack lines - are more than willing to be creative in bending reality to fit the desired narrative.
No-one is being “bailed out”, no matter how loudly and frequently the claim is made. But the reality is more complicated. Politicians need it to be kept simple. Thus the problem.