DfT denies government has given bailout to Virgin rail franchise

Written by Richard Johnstone and Tamsin Rutter on 9 January 2018 in News
News

Transport department insists that franchise will continue to meet financial terms to 2020 and has paid more to Treasury than previous state-owned operator

Photo: PA

The Department for Transport has insisted that no bailout has been provided to the Virgin East Coast rail service after former transport secretary Andrew Adonis said civil servants were weak for not challenging transport secretary Chris Grayling’s move to end the franchise early.

Lord Adonis, who resigned from his role as the chair of the National Infrastructure Commission last month, said that the decision to end the East Coast rail franchise three years early, in 2020, amounted to a bailout as private operators the Virgin Group and Stagecoach, who run the service as a joint venture, would avoid payments in the final years of the franchise.


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A new partnership model announced in November is to replace the franchise contract. Adonis told the Progressive Britain podcast, run by Labour pressure group Progress, that he had been approached as transport secretary with a similar request from National Express in 2009, and that he had nationalised the east coast line rather than offer an early end to the contract. He added that the civil service had been “very weak” in allowing the move this time.

“I’m amazed that the senior civil servants in the Department for Transport allowed Chris Grayling to do this because of the straightforward value for money issues concerned,” he said.

However, a spokesman for the Department for Transport told CSW that the government had been “very clear [that] no one is getting a bailout and Virgin Stagecoach is meeting the financial commitments it made to the taxpayer on the East Coast rail franchise, as it has done since 2015”.

The spokesman added: “Profits continue to flow to the taxpayer and any suggestion to the contrary is completely wrong. Stagecoach has also – on average - paid 20% more back to the taxpayer than when the line was operated by Directly Operated Rail [following Adonis’s decision to nationalise the line] and we continue to receive hundreds of millions of pounds.”

The decision to bring in a partnership to run the service from 2020 was intended to ensure that train companies work more closely with Network Rail to help improve the service for passengers, the DfT added.

About the author

Richard Johnstone is CSW's deputy and online editor and tweets as @CSW_DepEd

Tamsin Rutter is senior reporter for Civil Service World and tweets as @TamsinRutter

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