In March last year the government announced its intention to reprivatise intercity services on the East Cost Main Line by the next election. Since then I’ve been part of a broad campaign to Keep East Coast Public. Prioritising the franchising process to return East Coast to private hands means the competition and private investment that might have been available for other intercity lines has all but disappeared.
Under the government’s initial franchising timetable from August 2011, a new contract for the West Coast Main Line was due to start in October 2012, with Great Western starting in April 2013 and East Coast in December 2013.
However, following the debacle over the West Coast bidding process, a new timetable was announced in March last year. East Coast – previously last in the trio of intercity franchises to be let in the near future – was brought forward in relative terms to April 2015.
This was only made possible by the current operator of the West Coast – Virgin – being given a four and a half year franchise extension to April 2017. Similarly Great Western operator First was given a two and a half year extension to September 2015. In total that’s 77 months’ worth of extensions.
Government ministers have justified prioritising East Coast by referring to the Brown review and the previous Labour government’s support for franchising. By implication they are restating their belief that competition in the bidding process should, among other things, drive private investment.
But let’s be clear – while franchise competitions might achieve this goal – franchise extensions certainly do not.
This is because the government has no option but to negotiate with existing operators. The only bargaining chip ministers can use is to threaten to call in East Coast’s parent company, Directly Operated Railways. But ministers’ reluctance to do this is well known – highlighted by their desperation to extract DOR from the East Coast Main Line.
As a result competition is effectively absent and the companies have no incentive to invest. So when the extension for Great Western was agreed with First, the best the Department for Transport could do was herald an agreement to roll out wifi on trains. This is a relatively cheap investment – First will use Network Rail’s pre-existing communications equipment – and is something that would have been expected of any operator. No agreement was reached on installing plug sockets, because this would have required a more substantial outlay on First’s part.
So instead of investing, extensions give operators an opportunity to demand significant levels of subsidy that are likely to cost the taxpayer dearly. In 2011-12, Virgin paid the department a premium of £165m and First Great Western paid £110m. Although we don’t have figures for Virgin yet, we know that the payment from First will drop to a mere £17m this year.
The key point is that, if East Coast hadn’t been prioritised for reprivatisation, then these extensions wouldn’t have been necessary and competitions for West Coast and Great Western could have been held in the near future.
Now, I might have accepted the government’s decision had East Coast been performing badly in the public sector. The imperative to turn East Coast around might have trumped the various disadvantage of negotiating extensions on the West Coast and Great Western.
But as has already been said many times, East Coast is performing well, so this defence simply isn’t available to ministers who remain ideologically wedded to a policy whose negative impact is now being felt across the network.
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Sheila Gilmore is member of parliament for Edinburgh East. She tweets @SheilaGilmoreMP
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