Government may be forced to take over East Coast rail franchise, Chris Grayling admits

Posted On: 
6th February 2018

The Government may be forced to run East Coast mainline rail services after the private sector operator “got its numbers wrong,” Chris Grayling has said. 

Transport Secretary Chris Grayling has admitted that East Coast mainline services may have to be taken back into public hands
Credit: 
PA

The Transport Secretary told MPs yesterday that the deal with Stagecoach to run the franchise would have to be cut short as the company had “overbid” for the contract.

Speaking in the Commons Mr Grayling added the Government could step in to ensure services continued.

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"The problem is that Stagecoach got its numbers wrong. It overbid and is now paying a price," he said.

But the Transport Secretary insisted that it would be the firm that took the financial hit, saying: "Stagecoach will be held to all of its contractual obligations in full."

He added: "It should also act as a stark warning to any company tempted to over-bid in future."

Former Labour transport secretary Lord Adonis slammed the move, accusing Mr Grayling of "undertaking another unjustified bailout of Virgin and Stagecoach at the expense of taxpayers".

He added: "The reason for these disgraceful bailouts we've been seeing from Mr Grayling is because he simply is not prepared to contemplate putting his duty above ideology and substituting for failing private companies a state company."

However, Mr Grayling was adamant that there was "no question of a bailout".

Stagecoach and Virgin were contracted to run the East Coast line from 2015 to 2023, for which they promised to pay the Government £3.3bn.

But Stagecoach, which owns 90% of the joint venture, is now set to lose about £200m on the collapsed deal, equating to more than 20% of its total market value.