The 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.