There’s something very fishy about this West Coast mainline fiasco
October 4th, 2012The explanation offered by the Transport Department, in McLoughlin’s letter to MPs, is that “these flaws (found by officials only when under the threat of a judicial review from Branson, but significantly not before) stem from the way the level of risk in the bids was evaluated. Mistakes were made in the way in which inflation and passenger numbers were taken into account, and how much money bidders were then asked to guarantee as a result”. I find this facile and unconvincing since there must be more to it than that. Balancing risk against revenue lay at the heart of the process, the more so since the government had dangerously extended the life of the franchise from 7 to 13 years, and it is inconceivable in this case of heavily contested bids with huge sums at stake (FirstGroup’s £13bn against Branson’s £11bn) that the parameters for assessment of risk and claims of higher revenue from increased passenger numbers would not have been rigorously worked through, checked and re-checked until their robustness was judged to be foolproof. This cannot just be put down to 3 officials, who’ve been suspended, who made some unfortunate mistakes since whatever their assumptions and estimates were, they would have been scrupulously crawled over at all the higher levels of the Department right up to the top.
Indeed one could argue that if the Department’s explanation is really to be taken at face value, then DfT is seriously not fit for purpose. The decision to award the franchise to FirstGroup is extraordinarily difficult to justify when (i) it was based on a very substantial increase in journeys, (ii) all the risk was back-end loaded in a near doubled franchise period, and (iii) there is already the precedent of the East Coast mainline franchise having been handed back when the operators couldn’t meet their commitments and simply walked away, to the disadvantage of taxpayers.
This shambles deserves a thorough and detailed inquiry into exactly what went wrong since the bland official verbiage is not telling half the truth. But the inquiry should also focus on whether, given the pitfalls exposed this time round, there should be a new franchising process at all. The East Coast mainline franchise is now being run, very much to the benefit of the taxpayer, by the government through DOR (Directly Operated Railways). There is unquestionably a groundswell of public opinion in favour of returning the railways to public ownership, yet once again Labour reamins super-cautious about the idea, even telling Maria Eagle, the party’s transport spokesperson, to pipe down when she began to fly the idea.
October 4th, 2012 at 9:58 pm
Something fishy or just something inherently wrong with govt pretending it can seriously interact with the markets…which are based on unlimited buyers, sellers, perfect info, etc…even the private sector struggles with that…if you are the only purchaser in the mkt…
October 6th, 2012 at 2:51 pm
Dear Mr Meacher,
A good read which reinforces my strong request to my MP for information about the disposition of 100 million pounds, a cost to the taxpayer directly linked to this outrageous fiasco. Sadly it is very difficult to truly understand what is going on in the UK due to a poor, short memory and sensationalist Press and to disinformation. I believe British Rail was in fact well managed by experienced staff at all levels, but hampered by industrial disputes and untimely funding, preventing good strategic planning.
Well done !
Roger Allingham-Mills, Burbage, Leics.
October 6th, 2012 at 6:00 pm
It occurred to me that the significance might be the international component of First Direct’s bid. I believe that under WTO rules, it is not possible to re-nationalise when there is a foreign corporation involved but it is if there is a indigenous company.
It is very curious that the DfT was so committed to rejecting the Virgin bid. However, locking in long term contracts to prevent a future Labour government’s actions seems to be par for the course.
October 7th, 2012 at 8:53 pm
David Cameron personally intervened by asking the Cabinet Secretary to investigate. This was after a private appeal from Sir Richard Branson. Tory donor gets on the phone and there is a 180 degree U-turn. That’s how the Tories work.
October 11th, 2012 at 4:50 pm
Congratulations on your speech about tax evasion. I am very much anti-politicians as I firmly believe it is they and the system they operate which is the real cancer in our country. Individual politicians clearly have the ability to do much more for the country as a whole than the whole of the political system can manage. It surely has to be recognised that our system is not fit for purpose and is corrupt – there is more than enough evidence to prosecute yet that is something that will never happen. Because of corruption. Anyway, keep going Mr Meacher, you never know your luck!
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