When Labour renationalised the East Coast Main Line in November 2009, it did so out of necessity rather than conviction. The private holder of the franchise, National Express, had defaulted on the £1.4bn contract agreed with the government just two years earlier and the then transport secretary, Andrew Adonis, was “not prepared to bail out companies that are unable to meet their commitments”. Adonis, who was nicknamed “the thin controller” by the industry, suggested that the franchise would be “re-let again to a new private operator” by mid-2011.
Three years later, the coalition government is in the process of doing just that but Labour’s voice is raised in protest. East Coast, the publicly owned train operating company established by ministers as an operator of last resort, has proved more successful than almost anyone anticipated. It has cut journey times, carried more than a million extra passengers and achieved the highest customer satisfaction of any rail company. Free of the need to pay dividends to private shareholders, it has also returned £640m to the Treasury to reinvest in the service. In 2012, Virgin Trains received seven times as much in taxpayer subsidy to run the West Coast Main Line.
“There’s a great esprit de corps among management and staff,” Adonis told me when I asked him to explain East Coast’s remarkable performance. “They haven’t had to work to an impossible business plan, which was the big problem with National Express before. All of those factors have contributed to good performance and a strong, self-confident public company.” The Conservatives’ desire to reprivatise the line was, he suggested, based on pure ideology. “They don’t like the concept of a successful state company and they’re keen to kill this idea before it gains traction and might gain other franchises. The other private-sector companies are also very anxious that East Coast is abolished before the election, so that it provides less competition to them for future franchises.”
But with the government aiming to complete the privatisation by February 2015, Adonis, who is now Labour’s shadow infrastructure minister and is leading the party’s growth review, warned that ministers are short of time.
They’ve got literally only a few weeks of leeway, and given the chronic incompetence of the Department for Transport in letting recent contracts, I think there’s a very good chance that the contract won’t be let by the election. And if East Coast continues to exist as a company at the election then I’m sure Labour would want to keep it in operation as a state company.
Some in Labour have suggested the party could incrementally renationalise the railways by taking franchises back into public ownership as they come up for renewal (an option supported by 66 per cent of the public according to a YouGov poll last November, with just 23 per cent opposed). “I don’t use the language of renationalisation but of fair competition,” Adonis told me. “My view is that the performance of East Coast as a state company is sufficiently strong that it would stand a good chance of being able to win future franchises on a fair basis. And, of course, because it doesn’t have to pay dividends, it has a substantial financial advantage.”
He concluded: "I would say at the moment, given the catastrophic performance of the government in handling the West Coast franchise, and the fact that the lawyers will be deeply nervous about legal challenges to the franchising process next time round, I think there’s a very good chance that East Coast will still be a public company by the time of the election."
The irony is that a government ostensibly committed to competition is, in this instance, determined to quash it. But even the Tories’ aversion to public ownership has its limits: one of the three approved bidders is the foreign firm Keolis: 56.7 per cent owned by the French state.
Clarification: Virgin Trains has asked us to clarify that it received no net subsidy for running the West Coast Main Line in 2012 and paid a premium of £168m to the Treasury. The figures cited in the piece, 'seven times as much in taxpayer subsidy to run the West Coast Main Line', referred to the net subsidy paid to Network Rail for maintenance of the rail infrastructure minus the premium generated by Virgin Trains.
Now listen to George discuss the possibility of renationlising the railways on the NS podcast: