Sorry story of franchise

The history of the franchises on the East Coast Main Line makes sorry reading.

The first train in the now familiar Virgin East Coast livery approaching Berwick on March 1, 2015.
The first train in the now familiar Virgin East Coast livery approaching Berwick on March 1, 2015.

The decision to privatise railway services in the Railways Act 1993 was thought to have been determined by the Prime Minister’s desire to revive the colourful liveries of the ‘big four’ companies that existed from 1923 to 1947, and was against the advice of Nicholas Ridley, who had been responsible for the privatisation of buses in the mid-1980s.

It was intended that the railway infrastructure should remain under public control, but it was sold to Railtrack, a commercial company, which discharged its responsibility for the track and signalling by contracting specialist engineering firms to inspect, maintain and renew them.

It retained responsibility for the major stations, while leasing others to the service franchise holders (train operating companies).

When the franchising process began, each company was sold for £1. The East Coast Main Line was privatised on April 28, 1996, the franchisee being Great North Eastern Railway (GNER), a subsidiary of Sea Containers Ltd.

The value of the companies was much affected by the 33 per cent rise in passenger traffic that had occurred in the last decade before privatisation. GNER’s services were entirely drawn from InterCity, whose losses had been eliminated by 1989.

It was said that the 1993 Act was structured and timed so as to make it virtually impossible for the process to be reversed by a subsequent Government of a different political persuasion.

The first of the companies to be in deep trouble was Railtrack when two major disasters occurred just outside Paddington, and a third at Hatfield. Railtrack was closed down and the responsibility given to a publicly-owned, not-for-profit company, Network Rail, in 2002.

GNER developed a good reputation for high quality, reliable operation. Staff morale was excellent. In general, railway personnel are primarily railwaymen, rather than employees of any particular company. Nevertheless, GNER railwaymen basked in the reputation of the company as the best of the privatised bunch.

One feature of the rail companies was the huge amount of money they had to hold in reserve to guard against fluctuations in day-to-day cash flow. Disaster struck GNER as one of the effects of the financial squeeze when Sea Containers was unable to sustain its guarantee to the Government and had to ‘hand the keys back’.

Its successor, which took over on December 9, 2007, was National Express East Coast.

Staff morale collapsed almost overnight and less than two years later its tenure was terminated and the operation was taken over by the Government’s operator of last resort, Directly Operated Railways, trading simply as East Coast, on November 14, 2009.

It was expected that this franchise would be re-let soon, but difficulties with other franchises resulted in a full-scale review of the process, and when it came to the point of inviting tenders the matter became intensely political.

East Coast had been operating for five years and had gone a long way to restoring the reputation of services. It had returned large payments to the Government, and there was strong pressure to retain it, rather than re-let the franchise. Nevertheless, political ideology required that it had to be returned to the private sector.

On March 1, 2015, it was taken over by Stagecoach, with a 10 per cent input by Virgin Trains, trading as Virgin Trains East Coast.

As a result of the massive over-bid for the franchise, the Government has had to terminate it three years early in 2020 because the payments rise steeply in the last three years.

What will happen in 2020 depends upon the Government in power at the time.