East Coast rail ‘bailout’ could cost taxpayers hundreds of millions
As a regular user of this service and someone who enjoyed the service provided by the public body East Coast Trains this announcement makes me feel a bit aggrieved. Do I have any fellow East Coast travellers with similar views??? The article tells us:
The East Coast rail franchise will be terminated three years early, avoiding the embarrassment of another private firm handing back the keys to the government but potentially forfeiting hundreds of millions in premiums due to the Treasury.
Under a rail strategy announced by the transport secretary, Chris Grayling, a new partnership model will replace the franchise contract of Virgin Trains East Coast (Vtec).
The train operator, a joint venture led by Stagecoach with Sir Richard Branson’s Virgin Group, had pledged to pay £3.3bn to run the service until 2023 when it was reprivatised in 2015 after six years in public hands.
Instead, Vtec is likely to pay a fraction of that sum, with the bulk of payments due in the final years of the franchise.
The firm signalled that it also expects its payments for the next three years to be cut. In the first full year of operation, it paid £204m. Shares in Stagecoach jumped 12% on the news.
Andy MacDonald, the shadow transport secretary, told the Commons that the strategy announcement was “a total smokescreen”. He said: “The real issue is that the East Coast franchise has failed again and the taxpayer will bail it out.”
Pointing to the share price rise, he said: “Markets don’t lie. The secretary of state has let Stagecoach off the hook for hundreds of millions of pounds. He’s tough on everyone except the private sector.”