Five questions answered on four rail firms taking one government to court

Rail firms start legal action.

Four rail firms today have started legal action against the government over the cancelling of the Great Western rail franchise. We answer five questions on the current legal proceedings.

Which train companies are taking the government to court?

FirstGroup, Stagecoach, Arriva and National Express have all gone to court in a bid to claim compensation from the government.

What exactly do they want compensation for?

In January, the government cancelled the Great Western bidding process after it said it wanted to revaluate it after the collapse of the West Coast mainline a few months before.

Cancellation of the bidding process was a big blow for the train companies who would have spent about £10m on the process, hiring large teams of experts and lawyers to put together their bids.

How much could the train companies get as a pay out?

It is believed it could cost the government about £40m.

However, the BBC are reporting that a ‘stay’ period has been established  in the legal proceedings until the end of March allowing both sides to come to a compromise.

Ministers are currently compensating bidders who lost out on a defunct West Coast deal.

What are industry insiders saying?

Nigel Harris, the editor of Rail Magazine, speaking to the BBC said: "A refusal to refund may conform to the letter of the contract rules but utterly fails the 'right thing' test.

"It makes no sense to penalise innocent bidders - especially when you want and need them to re-bid."

However, lawyer Patrick Twist at Pinsent Masons told the BBC:

"By lodging papers with the High Court the bidders are keeping open their ability to pursue the Department for Transport for the costs they wasted on bidding for the cancelled Greater Western franchise procurement," he said.

"The department will strongly resist any claim and the same bidders will have the opportunity to rebid when the franchise is reprocured. So it would be surprising if this really does lead to litigation."

What is the government saying?

The government has come under increasing flak for messing up the process, which they have already spent £50m on.

Here is what Transport Secretary Patrick McLoughlin said earlier in the year: "In keeping with the relevant invitations to tender, which made clear that bidders are responsible for their own costs, the secretary of state does not believe it would be appropriate to reimburse bidders."

Photograph: Getty Images

Heidi Vella is a features writer for Nridigital.com

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.