A leading MP has called for fundamental reform of the railways after her committee found that ministers and the franchise holders shared the blame for the East Coast mainline debacle.
The Commons Transport Committee found that Virgin Trains East Coast (VTEC) ‘simply ran out of money’ because the revenue projections underpinning its bid were over-optimistic, despite running the route successfully amid high passenger satisfaction ratings.
VTEC, a joint venture between Stagecoach and Virgin, was unable to continue to meet its premium obligations to the Department for Transport.
The line went into technical default in January 2018 and the contract was terminated in June after just three years of operation.
Committee chair Lilian Greenwood MP said: ‘The Secretary of State pointed the finger at Stagecoach and Virgin for getting their bids wrong, but the Department is not blameless. Even now, there is no concrete plan, nor timescales, for the interim operator of this franchise.
‘From our inquiry, we cannot be sure, and cannot reassure passengers or public, that the arrangements for the East Coast Partnership will more successfully overcome the systemic difficulties presented by the current set-up.’
She added: ‘Following the failure of the East Coast line, there is talk that the prime minister has ordered a major review of rail franchising—we await more details. However, if this or any other future partnership arrangement is truly going to deliver a step-change in performance for the passenger, more fundamental reform of our railways is required.’
MPs said that ‘had the Department for Transport conducted appropriate due diligence and identified the weaknesses underpinning the bid, we may not have been in this position today’.
They concluded that the setting of unrealistic benchmarks in the Invitation to Tender encouraged overbidding; the bid process lacked the necessary boundaries to discourage this; and the financial stress-testing of the bids was not robust enough.
‘Therefore, the DfT must also take some responsibility for this franchise failure.’