Thousands of rail passengers face higher fares and reduced service quality as a result of government plans to re-privatise the East Cost Main Line, according to the UK’s primary competition watchdog.
The privatisation of the major route between London and Scotland would see Inter City Railways Ltd (ICRL), a subsidiary jointly owned by Stagecoach and Virgin Trains, take over the East Coast franchise on March 1, and has already been heavily criticised by unions, campaigners and opposition MPs.
Now the Competition and Markets Authority (CMA) found in an initial investigation into the proposals ‘that there is a realistic prospect' it would lead 'to higher fares or reduced service quality' as a result of a lack of competition on certain sections of the line.
Services running between Peterborough and Grantham and Peterborough and Lincoln overlapped between East Coast rail services and East Midland Trains - both potentially operated by Stagecoach
A similar overlap was found on East Coast rail services and Citylink coach services - operated and jointly owned by Stagecoach - between Edinburgh and Dundee as well as between Edinburgh and Aberdeen.
It added concerns that the award to ICRL could also result in ‘higher coach fares or reduced coach services quality (including a reduction in frequency) on these overlapping coach and rail services routes, given that coach services are unregulated’.
Andrea Coscelli, executive director, markets and mergers at CMA said: ‘Our investigation has shown that no significant competition concerns arise on most routes where East Coast services overlap with existing Stagecoach or Virgin Trains rail or coach services. However, we found that the award could give rise to higher fares or reduced service quality for rail passengers travelling between Peterborough, Grantham and Lincoln and for coach and rail passengers travelling between Edinburgh, Dundee and Aberdeen, in some cases possibly affecting thousands of consumers relying on public transport services. ICRL can now offer a resolution to these concerns to avoid the award being referred for an in-depth phase 2 investigation.’
ICRL has until 13 February to offer a resolution and the CMA has until 20 February to decide on the offer. If an agreement is not reached the phase 2 investigation is likely to go ahead.
If no agreement is made, the ICRL could still start operating the East Coast franchise from 1 March 2015 as planned, however the CMA could impose a ‘hold-separate’ order for the duration of its investigation – which would ensure that assets are operated separately from and independently of respondent's business.
Critics of the privatisation move state that since 2009, the public operator on the east coast line, Directly Operated Railways, has achieved record performance and passenger satisfaction, and returned more than £1bn back to the Treasury.
Michael Dugher MP, Labour’s shadow transport secretary, said: ‘This is extremely embarrassing for the Government and demonstrates once again that the whole rushed franchise process should never have happened.
'David Cameron put privatisation ahead of the public interest when he decided to re-privatise the East Coast Mine Line.
‘Labour has called for a wholesale review of the franchise process. A different approach is needed – one that puts the public interest first, reverses the presumption against the public sector and properly stands up for passengers.’
A Department for Transport spokesman told newspapers: ‘We are confident that this franchise gives the best deal for passengers. Stagecoach/Virgin will take over responsibility for the franchise on March 1 2015, as planned.'
Stagecoach said in a statement: ‘Stagecoach notes that the CMA has identified limited issues. The company will study the detail of the CMA's review decision and work constructively with the authority to address the issues raised with a view to running services under the Virgin Trains East Coast brand as planned from 1 March 2015.’
