East Coast rail line taken back under public control just three years after privatisation

Rail services on the East Coast Main Line will be brought back under state control following the termination of the franchise agreement with Virgin Trains East Coast (VTEC).

Transport secretary Chris Grayling made the announcement after operators Virgin and Stagecoach could no longer meet promised payments in the contract, worth £3.3bn. Stagecoach, which owns 90% of VTEC, said it was "surprised and disappointed" that the government chose not to award it a new deal to continue running services on the London to Edinburgh route.

The services will be taken into public control three years after Virgin East Coast began operating and trains will now temporarily be run by the Department for Transport (DfT) through an operator of last resort (OLR). 

Stagecoach pledged to "work constructively with the DfT and the OLR in the weeks ahead to ensure a professional transfer to the new arrangements".

Announcing the decision, Grayling said: “I will terminate Virgin Trains East Coast's contract on 24 June. I plan to use a period of Operator of Last Resort control to shape the new partnership. So, on the same day we will start with the launch of a new long-term brand for the East Coast Main Line through the recreation of one of Britain's iconic rail brands, the London and North Eastern Railway, the LNER. The team that's been working for me since last autumn to form the Operator of Last Resort will take immediate control of passenger services. They will then begin the task of working with Network Rail to bring together the teams operating the track and trains on the LNER network."

Grayling announced in November the franchise would be replaced in 2020, three years earlier than expected, allowing the companies to escape large payments.

Many people have criticised the government’s decision to allow Virgin Trains East Coast to walk away early. But Virgin founder Richard Branson launched a staunch defence of the much-criticised Stagecoach/Virgin East Coast rail franchise “bailout” in January, claiming he and his partners had not “received a penny in dividends” and will in fact lose well over £100m.

While Branson admitted the partnership did agree to pay £3.3bn to the government over the eight-year franchise, he has cited failures and delays to a “huge upgrade of the infrastructure by Network Rail” which was promised on delivery of the bid.

One of the fiercest critics since the decision was made in November has been Lord Adonis, who resigned as chair of the National Infrastructure Commission at the end of 2017. Adonis has said he was forced to resign as the government was “trying to silence” him over his criticism of its handling of a multimillion pound rail franchise.

The former transport secretary's called Grayling decision “indefensible” with the benefits only going to the “billionaire owners of these companies and their shareholders”.

Shadow chancellor John McDonnell welcomed Grayling's decision. "Good to see Grayling implementing the first stage of Labour’s manifesto promise to renationalise the railways. I think I’m right in saying that he’s now nationalised more railways than any Labour minister in six decades. Come on Chris, East Coast line today, the whole system tomorrow," he quipped.

Chair of the transport committee, Lilian Greenwood has responded to the decision by suggesting MPs will be looking into the failed franchise.

She said: “Three times in less than a decade, the government has been forced to intervene in the East Coast rail franchise. It is a very sorry tale. Let the secretary of state be in no doubt – my committee will be looking closely that what has happened, the choices he made in the run up to this decision and his plans for a new partnership. It is important that the secretary of state is held to account not just for his policies but his implementation of them."

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