Virgin Trains East Coast franchise to end 24 June 2018 and is temporarily re-nationalised

[ChiefPlanner]

DOR on ECML did a very sound job , and they were not expected to "invest" in huge sums of money in the franchises , but to give a steady state in many areas , including sorting out a timetable that could be operated within reason. (painful though it was to drop Lincoln etc) , the period of their control seemed to buck up performance and staff morale.

As I understand it , they worked quite well (to say the least) in working with NR on Route Investment Review Groups etc on a bit more than just agreeing maintenance blocks and so on , as one would expect a caring and competent operator to do.

 

[Tetchytyke]

Maintaining the status quo wasn't an option for VTEC, or indeed for any bidder I suspect.

I'd agree with that. The government, politically, had to ensure massive increases n revenue to justify their controversial decision to privatise. Knowing that, franchisees knew they had to bid large or go home. Stagecoach overbid but I'm sure all the contenders were overbidding to an extent.

Truthfully I think Stagecoach thought they could pull a fast one again, and get bailed out just like they did on EMT (their bail out there was nearly £100m). I think they thought the Tories would bail them out rather than see the privatisation decision fail. Maybe with a stronger majority for the Tories they'd have been right; a lucrative management contract has been keeping their WCML coffers full for years. I think they also believed their own hubris about how only the private sector can maximise revenue; I think they complacently thought they cut whack fares up by slyly cutting quotas and cut perks back with out people noticing. Regular customers did notice, and regular customers made alternative arrangements.

 

[Andrewh32]

As part of my day job I have had to audit bids to run services on behalf of government or councils (not train related) but the rules used are precisely the same.

It is extremely difficult using the guidelines to justify anything other than the bid that suggests the highest return to whichever public authority. In other words just being very optimistic isn't a reason for disqualifying a bid, you have to find a big mistake made by the bid team and prove it to the nth degree.

It doesn't therefore surprise me that what was clearly an optimistic bid was selected.

It may well be that the rules need a rewrite but on the flipside the rules must not rule out the best return to whichever authority, rules that work for every case are pretty much nonexistent

 

[Joe Paxton]

I'd agree with that. The government, politically, had to ensure massive increases n revenue to justify their controversial decision to privatise. Knowing that, franchisees knew they had to bid large or go home. Stagecoach overbid but I'm sure all the contenders were overbidding to an extent.

Truthfully I think Stagecoach thought they could pull a fast one again, and get bailed out just like they did on EMT (their bail out there was nearly £100m). I think they thought the Tories would bail them out rather than see the privatisation decision fail. Maybe with a stronger majority for the Tories they'd have been right; a lucrative management contract has been keeping their WCML coffers full for years. I think they also believed their own hubris about how only the private sector can maximise revenue; I think they complacently thought they cut whack fares up by slyly cutting quotas and cut perks back with out people noticing. Regular customers did notice, and regular customers made alternative arrangements.

Which is it?

Also, and only because it's not easy to try and find such figures (so I'm not coming at this from a point of denying it - rather, clarity is hard to find in such matters), I was wondering if you could flesh out the EMT £100m bailout figure? Was is in the form of revenue support grant? The multiple extensions of this franchise, like others, doesn't aid matters when it comes to working out such things.

 

[jon0844]

But DOR & now LNER, don't have the same motivation to make money as a franchisee has.
As there is no franchise agreement or agreed premium payments.
So I'm not convinced DOR were milking it.
Remember VTEC made more money than DOR, but it wasn't quite enough to meet the very optimistic premium payments.

I don't know how true it was that they let maintenance go a bit, but I know DOR were certainly less proactive on revenue protection. As you say, they weren't that bothered.

A problem for GTR too, but ticketless travel is checked regularly and GTR is fined if it goes over a certain level, which means they are getting more proactive and upping onboard train checks.

(It doesn't mean East Coast necessarily had huge levels of ticketless travel as maybe the larger quantity of Advance fares meant people DID have tickets, it's just that they weren't so regularly checked - or at stations).

DOR had a pretty easy service to run and it's hard to tell if the cracks would have begun to appear if they'd run the East Coast trains longer.

 

[jon0844]

It's the same people who were scared that if First group had won the WCML franchise then Virgin would take those Pendos and First would bring in their tatty Dmus to replace them. It's just ignorance, which is partially wilful because having to actually think about things is too much effort for some people.

It also helps some people to keep people ignorant. There's rarely much rush to correct people and clarify that, no, the trains don't get taken away by the old operator (perhaps First's owned HSTs were an exception, but even they don't get packed away in a cardboard box when the directors leave and turn out the lights).

Even if you tell people the mistake, they gladly ignore you because it doesn't fit their view and they'd sooner treat it as untrue. In a world of fake news and alternative facts, you don't need to know what's right anymore, just what you want things to be. Fingers in ears, 'la la la, I'm not listening'.

 

[jon0844]

It's crackers, isn't it? You would think that by now the public would have realised that it's just new stickers on the same trains, and perhaps a different uniform for the staff, if they're lucky. Especially so soon after the last franchise award.

Although the less rational "renationalistas" are going to be unbearable now, when they see a brand new fleet of trains begin to be rolled out almost immediately after the franchise is taken back into public ownership, notwithstanding that it has in fact been years in the preparation and planning!

Not only that, but they'll be able to point out how efficient a state run operation is because in next to no time, LNER got all these new trains built and in service. Meanwhile, other operators are waiting a year or two for new trains to be built and introduced!

 

[The Ham]

Not only that, but they'll be able to point out how efficient a state run operation is because in next to no time, LNER got all these new trains built and in service. Meanwhile, other operators are waiting a year or two for new trains to be built and introduced!

Maybe something like, LNER are better than GWR as they managed to introduce their new trains quicker and with less problems, therefore all TOC's should be state controlled.

 

[Mojo]

Or as it's a state run railway, pay rises are capped at the public sector cap so sorry RMT where we would love to meet your demands for a 5% payrise our arms are tied to a 1% rise.

That isn’t how the Public sector pay cap works. It doesn’t apply to the entire Public sector, only certain professions.

 

[Mike99]

With regard to ticket prices, one of the first things that regular users noticed about Virgin Trains East Coast was the significant reduction in the availability of the lowest-priced tiers of Advance tickets.

I suppose that it's a possibility, at least, that we may see greater numbers of lower-priced tickets being made available once again, though not lower fares per se.

Whether that happens or not, I don't think that I buy the suggestion that there'll definitely be a cost in terms of lost goodwill or loyalty with the change from Virgin Trains East Coast to LNER; in fact I think that there could be a not insignificant 'bounce'.

I know that I am not alone in having steered my travel away from Virgin Trains East Coast wherever possible, by combining Transpennine Express and Grand Central, or CrossCountry and Hull Trains, just to avoid the endless Virgin prattle and the less than harmonious atmosphere that bright red and black interiors seems to engender, along with the carriagefuls of uncomfortable passengers suffering from variously being freezing cold, ovtleer hot, under fed, over watered and/or begging for catheterisation.

Get rid of that, and we may see ridership increase without doing anything to the fares.

Is catheterisation an actual word........... I'll get me coat and leave quietly

 

[Mike99]

As silly as this sounds, my worry is LNER removing the first class head cushions. They've got Virgin on so I imagine they'll disappear, but they are very comfortable and the seat headrest piece on its own is just so hard and uncomfortable.

Don't go over worrying about that though

 

[Tetchytyke]

Which is it?

Both.

They thought they'd find it easy but also thought someone else would pick up the bill if they didn't. No risk. And they were right: someone else has picked up the tab.

EMT bailouts were revenue support ("we've done badly so the government should pay us instead"). They received £50m in just six months in 2012 and have had other bailouts since. All at a time when Souter and Gloag paid themselves the thick end of a billion quid in dividends.

The whole system is rotten to the core.

 

[nottsnurse]

Is catheterisation an actual word...

Yes, and it's a word I use frequently at work.

 

[whhistle]

None of that investment is of any benefit for future passengers.

No, but I'd have thought current passengers don't really care about the future.

Most people are selfish and want the good things now. That's why, while we're slowly changing our world, for the best part, humans care about the here and now, not about the future.

 

[SteveP29]

as that is what they'd signed up to to with the DfT (who let us not forget, could have turned round and said that 10% growth is stupid, don't be daft - but they didn't).

Of course they wouldn't, they'd be thinking of all the lovely money coming into their coffers to care

 

[Joe Paxton]

Of course they wouldn't, they'd be thinking of all the lovely money coming into their coffers to care

Money, it should be noted, that then went towards the subsidy for say Northern (albeit indirectly, as UIVMM premium payments all into the Treasury's coffers first).

 

[Joe Paxton]

Both.

They thought they'd find it easy but also thought someone else would pick up the bill if they didn't. No risk. And they were right: someone else has picked up the tab.

Not exactly - VTEC has lost Stagecoach/Virgin a load of money, though the operation in itself was not loss making (i.e. when taking the premium out of the picture).

EMT bailouts were revenue support ("we've done badly so the government should pay us instead"). They received £50m in just six months in 2012 and have had other bailouts since. All at a time when Souter and Gloag paid themselves the thick end of a billion quid in dividends.

The whole system is rotten to the core.

Though the revenue support grants were part of the franchise contract, not some specially negotiated extra.

I can believe that the sum that went to EMT could have amounted to £100m, but the above is a little vague (and the six month sum in 2012 was £46m not £50m - article). I appreciate part of the difficulty is tracking down reports of payments that neither the TOCs nor the government want to shout about. But I remain pro-solid fact, unfashionable as that may be in this day and age!

 

[47271]

As a regular passenger I have no sympathy whatsoever for VTEC. They overbid and then ran the trains with high fares, erratic catering service, no regard for their best customers and a terrible online experience. All the while telling us how marvellous they are, or were. They appear to be complete fools having brought it all on themselves, sometimes it's hard to fathom their behaviour. Anyway, time's up and good riddance.

From my passenger point of view the only thing that they can be given credit for, and it did cost them quite a bit that they'll never see back, is internal refurbishment of trains. East Coast handed them over in a minging state in my opinion. The black and red leather might not be to everyone's taste but at least it's in good condition and will see them out on LNER or wherever else they go.

 

[stuart]

Over the past few years fares have gone up and up, while the standard of catering and other aspects of the service have fallen. "Oh, look how marvellous we are" does nothing for me.

 

[StephenHunter]

Over the past few years fares have gone up and up, while the standard of catering and other aspects of the service have fallen. "Oh, look how marvellous we are" does nothing for me.

A statement one could equally apply to BR in the 1990s. Especially when loco-hauled stock got replaced by Sprinters.

 

[43096]

Both.

They thought they'd find it easy but also thought someone else would pick up the bill if they didn't. No risk. And they were right: someone else has picked up the tab.

EMT bailouts were revenue support ("we've done badly so the government should pay us instead"). They received £50m in just six months in 2012 and have had other bailouts since. All at a time when Souter and Gloag paid themselves the thick end of a billion quid in dividends.

The whole system is rotten to the core.

Companies do not go into these contracts thinking it will be easy. Nor do they go into it thinking someone else will pick up the tab.

Until next month VTEC have been making premium payments exactly in line with their franchise agreement - they have been fully compliant in that regard. No one has bailed them out, no one else has picked up the bill. No risk? Stagecoach have lost many, many millions on this.

Going forward the loss to DfT is the difference between what VTEC would have paid and what is actually paid by LNER.

Your agenda and personal prejudices are, as usual, plain to see. Try looking at the facts before you post as well.

 

[Joe Paxton]

...
From my passenger point of view the only thing that they can be given credit for, and it did cost them quite a bit that they'll never see back, is internal refurbishment of trains. East Coast handed them over in a minging state in my opinion. The black and red leather might not be to everyone's taste but at least it's in good condition and will see them out on LNER or wherever else they go.

I think a significant part of the issue with East Coast (under DOR) was that for much of its existence it didn't know how long it was going to be around for (and it turned out to be somewhat longer than initially expected, courtesy of the 2012 WCML franchising debacle). This would have made planning significant investments such as refurbishments difficult, and besides DOR may well not have been able to lay its hands on the money in order to do so.

 

[WillPS]

Companies do not go into these contracts thinking it will be easy. Nor do they go into it thinking someone else will pick up the tab.

Until next month VTEC have been making premium payments exactly in line with their franchise agreement - they have been fully compliant in that regard. No one has bailed them out, no one else has picked up the bill. No risk? Stagecoach have lost many, many millions on this.

Going forward the loss to DfT is the difference between what VTEC would have paid and what is actually paid by LNER.

Your agenda and personal prejudices are, as usual, plain to see. Try looking at the facts before you post as well.

Have the contributions Virgin/Stagecoach have made been higher than what DOR/East Coast would have? As I understood it, the contract was set out in such a way that the franchise began with lower contributions and ended with *much* higher ones. I'd be interested to know if the treasury is actually better off as a result of this failed reprivatisation.

If it isn't, I'm sure you can see what my counter-argument would be.

 

[AlterEgo]

A statement one could equally apply to BR in the 1990s. Especially when loco-hauled stock got replaced by Sprinters.

BR didn't bellow superlatives at you though through every communication channel possible. I also doubt that had they existed in the Internet age they would have been ****posting memes all over Twitter.

 

[Emblematic]

No, but I'd have thought current passengers don't really care about the future.

Most people are selfish and want the good things now. That's why, while we're slowly changing our world, for the best part, humans care about the here and now, not about the future.

But we know the current passengers weren't impressed with the investment, not enough to keep the franchise afloat for certain. The investment was intended to grow passenger numbers, and it failed. The RDG were making out that the investment was good for the taxpayer, but if it failed to improve the business for the franchise, and doesn't leave a legacy, then what exactly is the taxpayer benefit?

Have the contributions Virgin/Stagecoach have made been higher than what DOR/East Coast would have? As I understood it, the contract was set out in such a way that the franchise began with lower contributions and ended with *much* higher ones. I'd be interested to know if the treasury is actually better off as a result of this failed reprivatisation.

If it isn't, I'm sure you can see what my counter-argument would be.

Put simply, yes they have been higher, and that has effectively brought the franchise to an end as the losses are unaffordable to the franchisee. RDG stated the premiums were 30% greater than under DOR, but we know that was not covered by revenues. The future increases in contributions would have been even more problematic, as they partly depend on service increases which were impossible to deliver without NR infrastructure projects which are delayed or deferred. As it happened, we never got that far.

 

[47271]

I think a significant part of the issue with East Coast (under DOR) was that for much of its existence it didn't know how long it was going to be around for (and it turned out to be somewhat longer than initially expected, courtesy of the 2012 WCML franchising debacle). This would have made planning significant investments such as refurbishments difficult, and besides DOR may well not have been able to lay its hands on the money in order to do so.

I totally agree - all I'm saying is that it's the one thing that I can see that Virgin can be given some customer credit for. I can't think of anything else.

 

[LNW-GW Joint]

Both.
They thought they'd find it easy but also thought someone else would pick up the bill if they didn't. No risk. And they were right: someone else has picked up the tab.
EMT bailouts were revenue support ("we've done badly so the government should pay us instead"). They received £50m in just six months in 2012 and have had other bailouts since. All at a time when Souter and Gloag paid themselves the thick end of a billion quid in dividends.
The whole system is rotten to the core.

Revenue support, by definition, comes in when the franchise is losing money by more than an agreed amount.
It shares the pain with DfT, just as DfT shares the gains on profits over an agreed amount.
Stagecoach was making losses on EMT during this period, not banking dividends.
SWT was also in revenue support in its final year or two (which is why Stagecoach refused a direct award).
Revenue support isn't offered on new franchises, the new GDP formula was supposed to be a better rule but has failed on its first outing.

On public sector bids, if DfT funds the TOC risks there is no level playing field so the private sector might as well just give up bidding.

 

[HSTEd]

A statement one could equally apply to BR in the 1990s. Especially when loco-hauled stock got replaced by Sprinters.

British Rail advertising, from what I've found on the internet, seemed to emphasis specific service improvements (see 'The Sprinters are Coming') - or stating that things were getting better rather than that they are already great. (There was a whole series of customer service focussed adverts about "We're getting better")

 

[Joe Paxton]

I totally agree - all I'm saying is that it's the one thing that I can see that Virgin can be given some customer credit for. I can't think of anything else.

Agreed.

 

[Tetchytyke]

Companies do not go into these contracts thinking it will be easy. Nor do they go into it thinking someone else will pick up the tab.

Yes they do. Souter sued for payments on SWT. Branson sued the NHS when he lost a contract (and also sued in 2012 when he lost).

No risk? Stagecoach have lost many, many millions on this.

And they've been allowed to walk away from the other losses. I'm also sceptical about the reported losses, given how much money left to other parts of Stagecoach in "management fees"; inflating losses is tax efficient, after all.

Not to mention the fact the real premiums were back loaded.

Your agenda and personal prejudices are, as usual, plain to see. Try looking at the facts before you post as well.

What facts? That Stagecoach have been allowed to walk away scot free from a massive error?

"Agenda"? Don't make me laugh. I said in 2015 the proposed premiums would never be paid. I said Stagecoach would worm their way out. I am right. That's not an agenda, it's common sense.

Politically I find Souter paying tens of millions to fund anti-gay lobbying extremely distasteful. I think THAT should be enough to bar his company from public contracts. But that's not why I'm criticising VTEC here. I'm criticising them because they screw up and walk away without a care in the world. It's privatised profit and nationalised risk. Nothing more and nothing less.

so the private sector might as well just give up bidding.

And wouldn't the likes of Arriva (mess at Northern, mess at XC) ), Go-Ahead (mess at LM, Southern, GTR and SouthEastern) and Abellio (mess at Northern, mess at Greater Anglia, mess at WMT/NWR) be such a loss to the railway.

Its amazing how holding these companies accountable for their contracts will scare them away! As I say, privatised profit and nationalised risk.