By Alex Klaushofer
News that part of the rail network is to return to the public sector has been greeted as the ‘last chance’ for rail franchises by one leading transport expert.
Transport Secretary Lord Adonis announced on July 1 that the government intended to take control of the East Coast Rail service later this year, after franchise holder National Express said it expected to default on the payments it owes to the Department for Transport under its agreement.
The company sought to renegotiate the terms of its contract when it became clear that the revenues from passenger fares would not cover the cost of the £1.4bn fee it had offered to run the franchise until 2015.
Adonis refused to change the terms. ‘It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging,’
he said. He has pledged to create a publicly owned company, with the existing staff transferred over. The government would put the franchise out to tender at the end of 2010, he added.
‘The franchise system is in the last-chance saloon,’ said rail expert Christian Wolmar. ‘By refusing to negotiate, Adonis has done the only thing he could do to save the system.’
If the economy worsens and more rail operators get into difficulty, ‘the whole house of cards’ could come down, he added. He predicted that a different franchise model – a halfway house with government taking more of the risk – would prevail in future.
National Express’s predecessor GNER gave up its franchise in 2006 after admitting its £1.3bn fee was optimistic.
News that part of the rail network is to return to the public sector has been greeted as the ‘last chance’ for rail franchises by one leading transport expert.
Transport Secretary Lord Adonis announced on July 1 that the government intended to take control of the East Coast Rail service later this year, after franchise holder National Express said it expected to default on the payments it owes to the Department for Transport under its agreement.
The company sought to renegotiate the terms of its contract when it became clear that the revenues from passenger fares would not cover the cost of the £1.4bn fee it had offered to run the franchise until 2015.
Adonis refused to change the terms. ‘It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging,’
he said. He has pledged to create a publicly owned company, with the existing staff transferred over. The government would put the franchise out to tender at the end of 2010, he added.
‘The franchise system is in the last-chance saloon,’ said rail expert Christian Wolmar. ‘By refusing to negotiate, Adonis has done the only thing he could do to save the system.’
If the economy worsens and more rail operators get into difficulty, ‘the whole house of cards’ could come down, he added. He predicted that a different franchise model – a halfway house with government taking more of the risk – would prevail in future.
National Express’s predecessor GNER gave up its franchise in 2006 after admitting its £1.3bn fee was optimistic.
