Former transport secretary Lord Adonis has described plans to introduce in 2020 a public-private partnership on the recently renationalised Intercity East Coast franchise as “Alice in Wonderland”.
The Labour peer told MPs on the Transport Select Committee that the Department for Transport would be risking taxpayers’ money and the quality of railway services if it redesigns the franchising system in “a fit of ideological fantasy”.
Andrew Adonis also said that the department’s five-month delay before deciding last week to temporarily renationalise the line had incurred unnecessary costs and been a “bonanza for lawyers, accountants and consultants”.
Adonis has been extremely vocal in his criticism of current transport secretary Chris Grayling’s handling of the now-failed franchise operated by Virgin Trains and Stagecoach.
Grayling told MPs last week that the franchise would be taken into public hands until 2020. This followed the joint operators revealing in December that they would no longer be able to meet their financial obligations because they had vastly overestimated their forecasts on passenger growth and overbid for the contract.
The transport secretary’s decision came after civil servants reviewed two options for the future of the line – allowing the current franchisee to continue operating on a not-for-profit basis, or handing it to DfT’s Directly Operated Railways.
Although the review was inconclusive, Grayling said he decided on the latter option because it would allow for an easier transition on the line to a public-private partnership from 2020. The purpose of the partnership is to enable closer alignment of infrastructure, which is the responsibility of Network Rail, and train operation.
This is the third time in a decade that a franchisee has failed to meet its contractual obligations on that line. Adonis was transport secretary when the franchise was first renationalised in 2009, when it was supposed to be under public ownership for two years but was not actually re-privatised until 2015.
Speaking to MPs on Monday, Adonis pointed out that the franchise – which has been renamed London North Eastern Railway – is not the only service operating on that East Coast Main Line, and warned of the risk of “second class services” developing for other operators on the line. “One thing you could be sure of is that the train operator, if they also directly control the track, will see that all the of the decisions are made to prioritise their services, including decisions on engineering works, on the phasing of investment and all of that,” he said.
“So what you’ll inevitably get sucked into – and the department will have to wrestle with this – is, all of the companies that come into Kings Cross, they all need to be part of this public-private partnership. Then you’ve got about a third of the national rail network.
“You just need to ask some of these questions. I’ve been there and done that job. This is Alice in Wonderland, that we’re in at the moment. If it ain't broke, don’t fix it.”
He added that he’d be “very wary in a fit of ideological fantasy to throw this whole railway industry up into the air which could cost billions and lead to a lot of places in the UK ending up with worse railway services as a result”.
Elsewhere he argued that the franchising model was working “reasonably well” and that it was possible to achieve closer alignment between Network Rail and train operating companies without creating a new public-private partnership model. He described Grayling’s plans for the line as “nothing more than a few jottings on the back of an envelope”.
Adonis told the committee that if he was still transport secretary he would have made the decision to take the franchise back into public hands much more quickly, and that he would ban Virgin Trains and Stagecoach from bidding for the same franchise in future.
He also said it was a mistake not to let Directly Operated Railways, which was widely regarded as successful when it took over the Intercity East Coast franchise in 2009, bid in 2015. He said the state was “perfectly capable of hiring first rate managers”, and at lower cost than train operating companies.
The Labour peer criticised the costs incurred by DfT in doing its assessment of options for the future of the line, and said costs could increase if the process is mishandled in the future and Grayling continues to be unclear about forthcoming policy.
He said: “This has been a bonanza for lawyers, accountants and consultants, the last five months, including very highly paid lawyers who have been advising on state aids and the legality of handing a further contract to companies that had defaulted on the previous contract.”
Elaine Holt, who was chief executive of Directly Operated Railways from 2009 to 2011, was also questioned by the Transport Committee yesterday. She told them that East Coast was a relatively simple franchise to operate, and that the state could successfully run railway services as long as various roles were outlined clearly.
She said: “I was running the railway and I was very clear about that. I was not a civil servant, I was a railway operator. There was a franchise team in the DfT who ran it as a kind of franchise process, and we kept it all very separate because if civil servants try and get involved in running a railway, that’s not what they’re employed to do.”