Stagecoach disqualified from three franchise competitions

[The Prisoner]

Apologies if this has been posted already. Guardian no great lover of Branson, but even they smell a rat. This will end up in court no doubt judging by the last debacle....

https://www.theguardian.com/busines...aves-behind-a-muddle-over-pension-liabilities

...the tale of how Stagecoach and Virgin were disqualified from three UK franchise competitions this week continues to intrigue, not least because the rail minister, Andrew Jones, gave shockingly vague answers when questioned in the Commons on Thursday.

Did the government change the rules on pension liabilities in the middle of the competition? Were operators told they would have to accept big pension risks that were previously assumed to be underwritten by the state?

Jones said the answer was no in both cases, but that prompts the question asked by the former Tory transport secretary Sir Patrick McLoughlin: if Stagecoach was always unwilling to accept the supposedly well-defined pension liabilities, why was it disqualified at the end of a lengthy process and not at the beginning? It makes no sense.

The questions continue...

 

[LNW-GW Joint]

I’m not sure what Stagecoach tax arrangements are. But it should be a prerequisite that any company which is based overseas or ultimately based overseas or has principle share holders overseas and do not pay UK tax. Then they are no longer eligible to run a Uk rail franchise or indeed any service which is in the gift of the government. Same should apply in any industry or service . So as far as Virgin is concerned they should be ruled out on that basis . We need a laser like focus and national priority to recover more tax from those clearly ducking tax. It only damages public services and spending. As for stagecoach. Like any other big business. Big business can become bad business . It uses its scale to exert more for less from it’s suppliers . Efficient can also mean predatory in its approach to business . It’s good to see a Scottish company being successful in the world stage. I think and hope they pay all proper tax on profits but I’m uncomfortable that the risk reward balance in franchise is tilted towards the TOC

There's a very long list of UK individuals based in tax havens, including many top sports people who are idolised by their fans, as well as many business owners.
It's not illegal.
It also works the other way round, with high net worth individuals from overseas choosing to live and operate from the UK.
Virgin Trains is a UK company paying all the relevant tax in the UK.
I should think because their operation is entirely in the UK they pay a higher proportion of their income in UK tax than, say, Amazon.
What Branson does with his tiny personal share is up to him.
He once said (during the 2012 debacle) all the returns from VT had been ploughed back into the business.
£600 million dividend in 20-odd years (split between Virgin and Stagecoach) is not a vast return.
There are risks too, as they experienced on VTEC; the losses wiped out about 3 years dividend on their joint operations.

 

[Mingulay]

There's a very long list of UK individuals based in tax havens, including many top sports people who are idolised by their fans, as well as many business owners.
It's not illegal.
It also works the other way round, with high net worth individuals from overseas choosing to live and operate from the UK.
Virgin Trains is a UK company paying all the relevant tax in the UK.
I should think because their operation is entirely in the UK they pay a higher proportion of their income in UK tax than, say, Amazon.
What Branson does with his tiny personal share is up to him.
He once said (during the 2012 debacle) all the returns from VT had been ploughed back into the business.
£600 million dividend in 20-odd years (split between Virgin and Stagecoach) is not a vast return.
There are risks too, as they experienced on VTEC; the losses wiped out about 3 years dividend on their joint operations.

No it’s not illegal. But it’s not honorable either. I don’t think you should get or retain honours like knighthood if you don’t pay UK tax. In fact that seems to be now policy as your tax status is scrutinized by honours committee

It boils down to whether as a country we are happy to put the burden of tax on the ordinary working folk and let off those with plenty and alleged status to opt out overseas.

I think there is a growing sentiment that we are not. Rail franchise would be a good place to start

 

[Agent_Squash]

No it’s not illegal. But it’s not honorable either. I don’t think you should get or retain honours like knighthood if you don’t pay UK tax. In fact that seems to be now policy as your tax status is scrutinized by honours committee

It boils down to whether as a country we are happy to put the burden of tax on the ordinary working folk and let off those with plenty and alleged status to opt out overseas.

I think there is a growing sentiment that we are not. Rail franchise would be a good place to start

And you’d like to see your service suffer to make what is essentially a political point? It’s already been made clear that a significant quantity of VTWC’s profits have been reinvested.

This policy of tax before service would surely prohibit foreign governments from bidding as well as all the profits are surely siphoned back into their coffers!

Sort the holes in the system and make tax work for everyone, withdraw honours if necessary - but don’t use public services as a bargaining chip for holes in the law.

 

[RealTrains07]

Same as stagecoach here then...........................

you really, REALLY, don't get this do you? Virgin cant just have another crack at the competetion with different partners. What you are suggesting now is the same as answering banana to the question what is the captial of Denmark, complaining no one told you it was wrong THEN expecting to be allowed to have another try at the question AFTER the deadline. Please do try to grasp this very simple concept.

And no, the government did not ( and in fact cannot) change the "contract" ( which is actually the wrong word for what is happening at this stage) at the last minute. They are not allowed to do so!

I know you wont read this but for anyone else interested the procurement rules are here: https://www.gov.uk/guidance/public-sector-procurement-policy

Actually i did.
That was my INITIAL interpretation and they were ideas, not actual suggestions of what they should do.

Tbh hard to trust the government let alone companies after recent screw ups in the rail industry/department

No need to be so angry either. Just because you might know more about this stagecoach situation than i do, doesnt mean you can have a go!!

As far as iam concerned the new EMT franchise probably wont be a disaster but it wont be a success either.

Stagecoach probably will come back from this however cant imagine their partners like virgin trying to run for the next GTR franchise, could u?

(More likely to be joint stagecoach coach bit for GW franchise)

Iam allowed to say what i think in this stagecoach mess. Disagree with what i say? Thats cool just dont try and tell me off for not knowing details like you

 

[jon0844]

I don't know what Virgin might bid for, and who with in the future. Clearly it would be joint bid with another established operator. It would have to be a sexy Intercity service, as I am sure Virgin would know how bad running a commuter service would be - TSGN or any other.

Could Virgin go to the other bidders and seek to licence its brand for a separate fee, or would the successful tender have to adopt a brand that was in the bid?

 

[Killingworth]

Reading that both Stagecoach and DB appear to have been disqualified it seems Abellio was the only valid bid on the table. Clearly Abellio have what they bid for and have put out all the positive spin we'd expect. I can't help wondering how they now feel about the terms they're locking themselves into. Might they too want to look at those terms and see if they can renegotiate before it goes too far?

 

[Bertie the bus]

Could Virgin go to the other bidders and seek to licence its brand for a separate fee, or would the successful tender have to adopt a brand that was in the bid?

What would be the point of that and who would be gullible enough to pay Virgin to put their brand on a train?

The VTEC shambles proved beyond doubt sticking Virgin on the side of a train doesn't put extra bums on seats (or floors if you are Jeremy Corbyn) and nor does it put extra cash in the bank.

 

[Agent_Squash]

What would be the point of that and who would be gullible enough to pay Virgin to put their brand on a train?

The VTEC shambles proved beyond doubt sticking Virgin on the side of a train doesn't put extra bums on seats (or floors if you are Jeremy Corbyn) and nor does it put extra cash in the bank.

Sure, it may not have worked on the East Coast - but having Virgin involved on the West Coast would allow that brand loyalty to continue - and the money saved in rebranding would probably cover the cost of the agreement!

 

[jon0844]

I think Virgin still has a strong name and reputation. In any case, once VTEC failed the press seemed to switch to talking of Stagecoach more than Virgin.

I am not sure there's the same love for LNER as there was for East Coast Trains/DOR.

 

[Robertj21a]

Reading that both Stagecoach and DB appear to have been disqualified it seems Abellio was the only valid bid on the table. Clearly Abellio have what they bid for and have put out all the positive spin we'd expect. I can't help wondering how they now feel about the terms they're locking themselves into. Might they too want to look at those terms and see if they can renegotiate before it goes too far?

Agreed. The one thing you can say about Brian Souter is that he's shrewd when it come to money and/or recognising when it's best to get out. I can well understand why he wouldn't want to have an open cheque hanging around the neck of Stagecoach.

 

[Bertie the bus]

Sure, it may not have worked on the East Coast - but having Virgin involved on the West Coast would allow that brand loyalty to continue - and the money saved in rebranding would probably cover the cost of the agreement!

That is completely nonsensical. Apart from the fact passenger growth on Virgin West Coast has been broadly similar to passenger growth just about everywhere there is also this from another thread:

The Glasgow numbers were interesting. Back when I was a lad in short trousers and a BR payroll number, I was given a task of surveying every London-Glasgow day train on the WCML to count passengers (we were checking ORCATs because Intercity East Coast were trying it on).
Delving deep into the memory banks from 26 (gulp!) years ago, I seem to remember the average was around 50-70 London to Scotland passengers per train. This was with about 8 trains a day each way. Therefore in the intervening quarter of a century (double gulp), knocking an hour off the journey time, doubling the frequency and reducing the real price of average fares has more than doubled passenger numbers. Feels about right.

Someone inside the industry, who knows the passenger numbers, doesn't even consider the passenger growth on Virgin West Coast to be anything other than what one would expect.

 

[Agent_Squash]

That is completely nonsensical. Apart from the fact passenger growth on Virgin West Coast has been broadly similar to passenger growth just about everywhere there is also this from another thread:

Someone inside the industry, who knows the passenger numbers, doesn't even consider the passenger growth on Virgin West Coast to be anything other than what one would expect.

The majority of my point was about the cost of rebranding being saved - reprogramming toilets to stop spewing rubbish out of the speakers costs money you know... But while yes Virgin’s figures may be similar to the industry, you seem to forget about other routes such as Manchester - the VHF timetable was a lot of work from all sides, but you’ve got to give some credit to Virgin for turning them WCML around from the sorry mess it once was. Stagecoach has helped with that journey.

 

[Bertie the bus]

No. Most of your point is Virgin are great. There isn’t supposed to be branding. All the new franchises don’t have it except for some vinyls stating ‘operated by’. Liveries are supposed to be neutral. It is Virgin who decided they’re too important to take any notice of that directive and slap huge company logos on the side. So you’re saying that because Virgin did that, against the wishes of the DfT, didn’t produce a brand neutral livery, against the wishes of the DfT, their branding should remain on the trains even if they don’t operate the franchise?

Erm, no you don't have to give Virgin credit for turning the WCML around. It was almost entirely down to the infrastrucure improvements which we paid for.

 

[6Gman]

The majority of my point was about the cost of rebranding being saved - reprogramming toilets to stop spewing rubbish out of the speakers costs money you know... But while yes Virgin’s figures may be similar to the industry, you seem to forget about other routes such as Manchester - the VHF timetable was a lot of work from all sides, but you’ve got to give some credit to Virgin for turning them WCML around from the sorry mess it once was. Stagecoach has helped with that journey.

And so - probably - would any other operator which had the franchise.

Perhaps better. Perhaps worse. But the key elements: - Pendolinos, 125mph running, the WCRM, Norton Bridge etc etc were not solely down to Virgin.

 

[Agent_Squash]

No. Most of your point is Virgin are great. There isn’t supposed to be branding. All the new franchises don’t have it except for some vinyls stating ‘operated by’. Liveries are supposed to be neutral. It is Virgin who decided they’re too important to take any notice of that directive and slap huge company logos on the side. So you’re saying that because Virgin did that, against the wishes of the DfT, didn’t produce a brand neutral livery, against the wishes of the DfT, their branding should remain on the trains even if they don’t operate the franchise?

Erm, no you don't have to give Virgin credit for turning the WCML around. It was almost entirely down to the infrastrucure improvements which we paid for.

I said some - there’s no denying that Network Rail managed to pull back the WCRM from near collapse. Also, companies even under new franchises are allowed to use their brand as long as they pay to remove the brand at the end - and the current WC franchise was let before that. So no, Virgin haven’t ‘decided they’re too important’ - they are simply doing what they’re allowed to do in their contract! And besides, the Virgin brand adds ‘value’ in the eyes of some - even if not yourself - I personally prefer TPE on the northern WCML but still can’t deny the work Virgin have done.

Now there’s so many people who seem to paint any private operator like they’re the spawn of the devil on here. Yes, the infrastructure was the key part of the WCRM - but you can’t deny that the VHF and Pendolinos haven’t help changed the WCML as well - and I believe Virgin did spearhead that...

Anyway this thread is about Stagecoach anyway - the downfall of South Western anyone?

 

[cactustwirly]

I said some - there’s no denying that Network Rail managed to pull back the WCRM from near collapse. Also, companies even under new franchises are allowed to use their brand as long as they pay to remove the brand at the end - and the current WC franchise was let before that. So no, Virgin haven’t ‘decided they’re too important’ - they are simply doing what they’re allowed to do in their contract! And besides, the Virgin brand adds ‘value’ in the eyes of some - even if not yourself - I personally prefer TPE on the northern WCML but still can’t deny the work Virgin have done.

Now there’s so many people who seem to paint any private operator like they’re the spawn of the devil on here. Yes, the infrastructure was the key part of the WCRM - but you can’t deny that the VHF and Pendolinos haven’t help changed the WCML as well - and I believe Virgin did spearhead that...

Anyway this thread is about Stagecoach anyway - the downfall of South Western anyone?

But weren't the Pendolinos and VHF specified by the WCRM anyway?

 

[Agent_Squash]

But weren't the Pendolinos and VHF specified by the WCRM anyway?

Not by the WCRM, although it made provisions for it: https://www.networkrailconsulting.com/assets/Uploads/West-Coast-Route-Modernisation.pdf

 

[Bald Rick]

But weren't the Pendolinos and VHF specified by the WCRM anyway?

No they weren’t.

Pendolinos and VHF were a Virgin proposal. The other proposals were based on an unspecified tilting train at max 125mph....

1) Stagecoach with high capacity EMUs
2) Sea Containers with higher spec new trains, but not so frequent as Virgin proposed.

 

[Bertie the bus]

VHF isn’t what Virgin proposed. We didn’t get what Virgin proposed because it wasn’t feasible. VHF was a DfT project and Virgin were told to operate it.

 

[The Ham]

Even though Virgin may or may not specified changes to the WCML it cannot be denied that they had a good marketing program which made rail travel more glamorous and therefore attractive to many.

 

[LNW-GW Joint]

VHF isn’t what Virgin proposed. We didn’t get what Virgin proposed because it wasn’t feasible. VHF was a DfT project and Virgin were told to operate it.

I don't think it was quite that black and white.
Through all the WCRM issues Virgin was a key player (stemming from PUG2, the Letter Agreement and all that).
The SRA also played a big part in sorting out WCRM, and Richard Bowker was ex-Virgin.

The Pendolino extension project was DfT though (after they turned down 2 Virgin proposals to do it).
Even then VT got to do the roll-out.
Since 2012, VT has been hobbled with repeated short direct awards with no scope for doing anything significant.
The DfT simply wanted the highest premiums.

 

[Goldfish62]

Even though Virgin may or may not specified changes to the WCML it cannot be denied that they had a good marketing program which made rail travel more glamorous and therefore attractive to many.

I commuted weekly to Manchester for nine months a couple of years ago and have to say I was very satisfied with the service. Yes, I find the Virgin marketing generally cheesy, but couldn't knock the overall package. I shall miss Virgin Trains.

 

[E100]

I think Virgin still has a strong name and reputation. In any case, once VTEC failed the press seemed to switch to talking of Stagecoach more than Virgin.

I am not sure there's the same love for LNER as there was for East Coast Trains/DOR.

I'd agree that LNER is still to prove itself. To be fair to the press (not that they generally deserve it) VTWC is 51% virgin / 49%stagecoach and VTEC was 10% virgin / 90% stagecoach.

When things are ok, which I would say is the case on the WC, I think there's a tendency for people to move away from change - if it's not broken why fix it. Arguably the whole system is broken but as far as a franchise within that system it's not, hence why it maintains a relatively good reputation compared to others. It's particularly the case when for a fair portion of the country it's compared against the connecting services of Northern and Scotrail.

 

[Bletchleyite]

I think Virgin still has a strong name and reputation. In any case, once VTEC failed the press seemed to switch to talking of Stagecoach more than Virgin.

Which makes sense, as it was a branded Stagecoach operation, not a VRG operation. The way it worked in terms of a wide range of policies was more like EMT than VTWC.

 

[Western Lord]

Regarding the value, or otherwise, of the Virgin brand, there's plenty of examples of failed Virgin branded goods and services.

 

[jon0844]

Regarding the value, or otherwise, of the Virgin brand, there's plenty of examples of failed Virgin branded goods and services.

Oh for sure. Loads and loads. But the reputation still seems pretty solid, even with SRB's (legal) tax avoidance and the NHS legal case (something I don't know the full details of).

 

[AndrewE]

Oh for sure. Loads and loads. But the reputation still seems pretty solid, even with SRB's (legal) tax avoidance and the NHS legal case (something I don't know the full details of).

"Virgin reputation" and "choice" is nothing to do with it. If you live on the west side of the country north of Brum then in most cases you get a "Virgin" train or you go by road. On some routes there are much slower stopping services and there is TPE from Manchester to Scotland, (and XC Manchester to Brum) but the pendolino timetable is the bedrock of the long-distance services.
It's a utility, infrastructure. The timetable is quite good and trains get used heavily. Their pricing policy might be suppressing demand (bad) and on the whole I would say the Virgin brand brings nothing to it.

 

[jon0844]

I think the brand does work for a lot of people who are unaware of how the system works. They'd still have Pendolinos running at the same service frequency if it wasn't Virgin, but to a lot of people the trains were built by Richard Branson (complete with steering wheels I seem to recall...) and without Virgin, they'd be back to steam trains or something.

Virgin knows this and will milk it for all its worth, hoping people will sign petitions and demand the DfT changes its mind. Who would most people side with? Richard Branson or the likes of Chris Grayling?!

 

[LNW-GW Joint]

The new West Coast franchise will not be the same as Virgin 1997-2019, because the ownership was going to be different.
Stagecoach (50%) will be in charge, with Virgin (30%) and SNCF (20%) in support.
The trains might still have Virgin branding (but might not), but the business priorities will be Stagecoach's (as was the case for the unfortunate VTEC).

And anyway, they were only one of 3 bidders and it was quite likely that either First Group or MTR would win anyway.
Your West Coast trains will be having a First/Trenitalia or MTR/Guangshen flavour as a result - get your heads round that one!
The situation for Virgin is not as it was in 2012, when "we wuz robbed" was a fair reaction to the flawed franchise process.
I somehow doubt that Stagecoach will raise a legal challenge this time - we'll know next week.
They are more likely to await the outcome of the Williams review and decide how to play rail from there.
If franchising is ending there is no point in flogging a dead horse.
Meanwhile, Branson will keep his Virgin Trains brand alive in Florida until the time is right again in the UK.