Government to assume control of East Coast main line

Author: By Russell Lynch, Press Association

Transport Secretary Lord Adonis said he had set up a publicly-owned company
which will take over the East Coast line when National Express ceases to
operate the franchise – probably later this year.

Lord Adonis added that the Government may have grounds to terminate National
Express’s other rail franchises – East Anglia and the London to Tilbury and
Southern franchise c2c.

The announcement of the takeover came as National Express announced its chief
executive Richard Bowker, a former boss of the now-defunct Strategic Rail
Authority, was leaving to take up a Middle East rail job.

The problem with the East Coast franchise was that National Express had to pay
back to the Government a total of £1.4 billion in premiums over the life of
the franchise.

But passenger growth has stalled in the recession and the company has failed
to renegotiate the franchise with the Department for Transport.

Today, National Express said it was no longer willing to provide financial
support for the franchise.

Lord Adonis said today: “I have therefore established a publicly-owned
company, which will take over this franchise from the point at which
National Express East Coast ceases to operate.

“We will agree an orderly handover with National Express. Until that
date, National Express will operate services on the current basis; after
that date the new public company will do so.”

He went on: “There will be no interruption of services. Existing
operational staff – who continue to provide a good service – will transfer
to the new East Coast Main Line company; so will the assets necessary for
the continuation of the service. I can assure the travelling public that
services will continue without disruption and all tickets will be honoured.”

Lord Adonis said National Express had said that it did intend to default on
its obligations in respect of its other rail franchises.

He went on: “Notwithstanding this, the Government believes it may have grounds
to terminate these franchises, and we are exploring all options in the light
of the (National Express) group’s statement this morning. In the meantime,
we expect National Express to meet its obligations on these franchises in

“A company which had defaulted in the way National Express now intends would
not have pre-qualified for any previous franchises let by the Department
(for Transport).

“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.”

Lord Adonis said it was the Government’s intention to tender for a new East
Coast franchise operator from the end of 2010.

He added: “The specification of the new franchise will reflect my concern to
secure better passenger services and facilities.”

National Express could be on course for a legal battle with the Government
over its decision to walk away from the East Coast deal.

The company has taken “clear and detailed” legal advice and believes the
Department for Transport would not have the right to recover losses from the
breach of the franchise agreement, or take over its other rail contracts.

National Express believes the Government would have “no grounds” to do this
because its other rail franchises are performing strongly.

Keith Norman, leader of the Train Drivers Union Aslef said: “Rail franchising
started off as a pantomime, then became a farce and has now become a folly.

“It is clear that this system is not working and it is no way to treat a
public service.

“Private franchises lead to short-term solutions rather than the long-term
rail strategy we need.”

Bob Crow, general secretary of transport union the RMT said: “We welcome this
denationalisation of the East Coast route but this shouldn’t be a
short-term, crisis measure.

“It should be a long-term solution to the chaos that privatisation has brought
to the UK’s most lucrative rail franchise.

“RMT’s national conference will send a clear message to the Government today
that they should strip National Express of their other franchises and use
this opportunity to begin the process of denationalising the rail network.”

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