Labour peer and former transport secretary Andrew Adonis, who renationalised the East Coast Main Line in 2009. Photograph: Getty Images.
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Andrew Adonis: East Coast Main Line could still be saved from privatisation

Former transport secretary says that the "chronic incompetence" of the government means "there’s a very good chance that the contract won’t be let by the election".

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.

ClarificationVirgin 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.

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Now listen to George discuss the possibility of renationlising the railways on the NS podcast:

George Eaton is political editor of the New Statesman.

Photo: Getty
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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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