Virgin East Coast Bailout WASN’T

Once again, the adage that a little knowledge can be dangerous has been proved true in spades, and once again it is the rail industry that does the proving. After it was announced that the Virgin Trains East Coast (VTEC) franchise would end three years early, in 2020, the oh-so-knowing abuse began: the public sector would have done better, it should be nationalised without compensation, and it was all Richard Branson’s fault.

London's Kings Cross terminus, the southern end of the East Coast Main Line

Andy McDonald, shadow transport secretary, told “I've written to the Transport Secretary Chris Grayling demanding that he comes clean about the bailout of Stagecoach/Virgin on the East Coast rail franchise and the cost to the public purse”. Andrew Adonis, another who thinks in stark monochrome on such matters, waded in with “Chris Grayling’s Stagecoach/Virgin bailout will come under intense scrutiny from State auditors. Rightly so - billions of taxpayers’ money & rail investment at stake!” The real amateurs were worse.

“Grayling has been accused of overseeing a ‘great train robbery’ amid claims that taxpayers will be left with a £2bn bill from a botched rail re-privatisation … Stop @Virgin_TrainsEC  getting a £2billion bailout from taxpayers because they've messed up  running our East Coast Mainline. Sign + share our petition with @We_OwnIt to bring it back into public ownership now!” And it got worse still.

“Virgin raid the public purse yet a-bloody-gain. Branson is an arch-chiseller. So he wears jumpers, affects bohemian airs |& “informality"? So fucking what? He's still a rapacious racketeer. East Coast rail bailout will cost taxpayers hundreds of millions … Stagecoach (and Virgin) took over … Company to benefit from an effective £2 billion bailout while potentially being lavished with a new contract on preferential terms post 2020”.

Quite apart from VTEC being a 90% Stagecoach-owned venture (Virgin Group’s stake is just 10%), as Roger Ford of Modern Railways magazine, who has rather more than a little knowledge of the rail industry has pointed out, rather a lot of nonsense is being spouted about the situation, and his analysis should put the critics straight.

“Readers will know that the situation is not as simple as the Branson-Bashers, Bring back British Rail proponents and left wing politicians like Lord Adonis would like to believe … As Stagecoach pointed out when it broke the bad news to its shareholders, ‘the scope and timing’ of the delivery of the new rolling stock under the government’s Intercity Express Programme and Government-owned Network Rail’s ‘reprioritised’ infrastructure upgrade programme for the East Coast Main Line were ‘not consistent with what was assumed in our franchise bid and then contracted’”. Meaning what, exactly?

Meaning that “So even had things been going swimmingly, VTEC would have run into a brick wall in May 2019 when the upgraded [East Coast Main Line] on which to run the more frequent and faster trains, including an hourly 4 hour London-Edinburgh service, was not available.  Without the services to attract more traffic and generate more fares income to pay  the rising premiums, the franchise would have had to have been renegotiated from April 2019 anyway”. This meant bad news for the Branson bashers.

“Since DfT is responsible for both the IEP contract and nationalised Network Rail, Government was on the hook as much as, if not more than, Stagecoach … So talk of a government bail-out letting VTEC off paying growing  premiums in the last three years of the franchise is mere political cant”. And the claims of being “bailed out”?

“Far from ‘handing in the keys’, Stagecoach is playing a long game and staying in play at a cost of £84.1 million over the next two years (2017-18 and 2018-19), in addition to drawing down £57 million from the Parent Company support loan commitment in the franchise agreement”. Funny kind of “being bailed out” that is.

Moreover, there is no guarantee who will operate ICEC after 2020: it might not be VTEC, although, as Roger points out, “Even assuming that … VTEC 2.0 comes into effect on 1 April 2018, it is then going to take at least two, probably three, years to sort out/rescue the Intercity East Coast timetable, especially power supply and rolling stock issues”.

He also relates a recent discussion with Labour’s Andy McDonald, concluding ruefully “We had [a] good chat, but I could not interest him in the fact that the VTEC franchise was shot from May 2019 because of the non-availability of the infrastructure upgrades needed. As with Andrew Adonis, for politicians issues have to be black and white, or rather red and blue, and nuance only weakens the message to the faithful”.

Quite. But the highly speculative and misleading suggestion that somehow Virgin and Stagecoach are going to be handed any fantasy sum of money up to £2 billion for doing something wrong is just so much guff. But politicians, campaigners, and far too many in the enthusiast fraternity are unable, or unwilling, to do the detail.

Once again, the righteous hot air bears all too little relation to both the reality, and the complexity, of the issue. It could serve all concerned to get knowledgeable before sounding off in future. Not that any of them are likely to do so.