Archive for the ‘Transport’ Category

The great rail debacle

I’ve been a little busy recently. This blog has had to take a back seat, as it were. But this morning’s announcent by the Transport Secretary that the franchising process is flawed, is quite the most extraordinary admission and begs some comment. We do not know – other than what Richard Branson claimed (see post 15 August 2012) – exactly what these flaws are, but the implications are signficant.

First Group this morning found its share price down 20 per cent even though – as the Transport Secretary said this morning on the Today programme – the firm is blameless. Three officials from the Department for Transport find themselves suspended. The whole franchising process which currently has a number of franchise bids in progress is now disfunctional. And the taxpayer will have to foot the bill for the costs incurred by those who bid in the West Coast franchise amounting to at least £40m.

It is not coincidental that this admission comes now as Branson’s case was due to be heard in court. It was clearly going to be even more embarrassing to have the court reveal the shortcomings.

And let us not forget the nonsense that is rail franchising in and of itself.

McLoughlin on Today 4 Oct

FirstGroup ‘win’ West Coast rail franchise in the UK

I am no supporter of rail privatisation. I wrote my PhD thesis on the subject. But the award of the West Coast franchise to First Group and the arbitrary way in which the rail companies can raise the price of their fares – RPI+3 per cent, suggest that there is something dysfunctional – at best – in the way the railways are managed and structured.

I’m no fan of Virgin and Richard Branson (see, but as an opener, I would endorse Branson’s statement, released this morning, outlining the non-learning that the Department of Transport has shown over the franchise bidding for this important piece of UK infrastructure.

“The Government decision to award the West Coast Main Line Franchise to FirstGroup is extremely disappointing for Virgin, and for our staff that have worked so hard to transform this railway over the last 15 years.  We submitted a strong and deliverable bid based on improving customers’ experience, increased investment and sustained innovation. To have bid more would have involved dramatic cuts to customer quality and considerable fare rises which we were unwilling to entertain.

We also did not want to risk letting everybody down with almost certain bankruptcy at some time during the franchise as happened to GNER and National Express who overbid on the East Coast mainline. Sadly the Government has chosen to take that risk with First Group and we only hope they will continue to drive dramatic improvements on this line for years to come without letting everybody down.

We won the franchise in 1997 with an agenda to change radically the way people viewed and used the train. At the time the track was run-down, staff demoralised, the service riddled with delays and reliant on heavy subsidies. We set hugely challenging targets to dramatically speed up journey times with modern tilting trains, increase the frequency of the service, improve the on-board experience; as well as double passenger numbers and return the line to profit.

We were told it was “Mission Impossible” and our plans were laughed at by critics. However 15 years later, despite continued problems with the track, we have achieved our targets. Passenger numbers have more than doubled to over 30 million, the fastest growth in the UK and world leading. We have the highest customer satisfaction of any long distance franchise operator and dominate the air/rail market between London and Manchester. It has been a remarkable achievement by an outstanding team who have successfully delivered on our promises.

I am immensely proud of our staff for turning the West Coast line from a heavily loss-making operation into one that will return the taxpayer billions in the years to come.  Last year we paid a net premium of £160 million to the taxpayer and have created a franchise worth more than £6 billion which is hugely valuable to the country.

These achievements have counted for little – as this is the fourth time that we have been out-bid in a rail tender. On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically. In the case of the East Coast Main line, both winners – GNER and National Express – over promised in order to win the franchise and spectacularly ran into financial difficulties in trying to deliver their plans. The East Coast is still in Government ownership and its service is outdated and underinvested, costing passengers and the country dearly as a result.

Insanity is doing the same thing over and over again and expecting different results. When will the Department for Transport learn?

Interestingly before Virgin took over the West Coast there were more passengers using the East Coast than the West Coast. Now there are 12 million fewer.

Under our stewardship, the West Coast Mainline has been transformed from a public liability into a valuable asset for the UK, worth many billions of pounds.  The service is a British success story and one to put up against rail companies around the world. It is a great shame that such a strong track record has been discounted in the evaluation process for one of the UK’s most important infrastructure assets. The country’s passengers, taxpayers and the West Coast employees deserve better.   Based on the current flawed system, it is extremely unlikely that we would bid again for a franchise.  The process is too costly and uncertain, with our latest bid costing £14 million. We have made realistic offers for the East Coast twice before which were rejected by the Department for Transport for completely unrealistic ones and therefore will have to think hard before embarking on another bid.

Our amazing staff have been the driving force behind the West Coast Main Line’s transformation and I am sure that for the last months of the contract they will all continue to run the high quality service that has helped win us many awards and attract millions more customers to rail.”