Stagecoach disqualified from three franchise competitions

[RT4038]

"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.

But then the Virgin (or any other) brand is not aimed at (or going to make much difference to) someone who yearns for the return of British Railways!

 

[Dave1987]

The final salary scheme should be abolished because they are not sustainable. This has happened at pretty much every single company.

If that isn't possible, the Government is really the only place for it to be kept safe.

Lloyds boss abolished the defined benefit pension scheme for all employees except..... HIMSELF. Said it was unsustainable to keep the defined benefit system going, but not so unsustainable that he could keep his massive pension. Same old same old. “Defined benefit pension schemes are unsustainable” except for those at the top. Can’t imagine most MP’s or top civil servants will be keen for their defined benefit pensions to be scrapped. All other mere mortals are destined to work until you drop or maybe until you can just about afford to retire with no disposable income to enjoy your retirement.

 

[RT4038]

Lloyds boss abolished the defined benefit pension scheme for all employees except..... HIMSELF. Said it was unsustainable to keep the defined benefit system going, but not so unsustainable that he could keep his massive pension. Same old same old. “Defined benefit pension schemes are unsustainable” except for those at the top. Can’t imagine most MP’s or top civil servants will be keen for their defined benefit pensions to be scrapped. All other mere mortals are destined to work until you drop or maybe until you can just about afford to retire with no disposable income to enjoy your retirement.

A few (opportunistic) individuals making exceptions of themselves doesn't make Defined benefit pension schemes any more affordable for all the rest of us other mere mortals though (unfortunately).

 

[Killingworth]

Lloyds boss abolished the defined benefit pension scheme for all employees except..... HIMSELF. Said it was unsustainable to keep the defined benefit system going, but not so unsustainable that he could keep his massive pension. Same old same old. “Defined benefit pension schemes are unsustainable” except for those at the top. Can’t imagine most MP’s or top civil servants will be keen for their defined benefit pensions to be scrapped. All other mere mortals are destined to work until you drop or maybe until you can just about afford to retire with no disposable income to enjoy your retirement.

The pensions issue is going to come back to haunt many who have been blind to the implications of actions going back decades. I may not agree with the hyper-sensitivity of some unions and their willingness to strike at the drop of a hat, but this issue is going to impact on their members as they approach their retirement. Fortunately ASLEF and the RMT have seen it coming and are getting prepared. I hope it won't paralyse the railways yet again. Stagecoach and Arriva have seen the writing on the wall. Abellio it seems either haven't, or have a cunning plan

In the early 1980s most big pension funds were well into surplus. Terms differed but essentially most employees could look forward to a pension based on half or 2/3 of final salary, with half of that going to their widow or partner for life. Some funds were non-contributory but most required a percentage to be paid out of salary to the pension fund. Many employers eyed those surplus funds avariciously. They were bound to top up pension pots that were short, why not take out when in surplus?

The employer I was with decided it wouldn't pay us a cost of living pay rise one year. The week before Christmas it made that announcement, but said the staff would still get a 2.5% rise. Simple really. The employer would take over the 2.5% staff contribution to the pension fund and guarantee to keep it funded in perpetuity. That went OK for a few years. The fund was still over funded and the employer was saving large sums each year. That's when they came up with another bright idea. Enhance offers to those taking early retirement and strip out all the older employees on top salaries. Almost everyone over 50 took the hint and left. By which time the government had cottoned on to the riches to be looted and a certain chancellor also took advantage.

By which time surpluses very soon started becoming deficits. Surpluses had been built up to cover future bad investment years. Now we had some bad years and the value of investments fell. Companies started going bust. Their staff found their pension funds had been stripped leaving them without the pensions they'd expected. The Pension Protection Fund lifeboat picks up a little for them, but a long way short of what they expected to get. Anyway, more and more employers have ditched their final salary schemes. Every day we hear of another firm unable to meet it's pension liabilities.

50 years ago a pension was part of the remuneration package, deferred income. The railway has been slow to adapt the practices forced on most of the British work force, almost certainly because the unions are so militantly strong. It's a battle the unions may find hard to win, now. Nevertheless it's one Stagecoach and Arriva seem to foresee. Best to leave the field for now and let others get any fighting over.

I hope I'm wrong and that Abellio do indeed have a cunning and cost effective plan to work harmoniously with ASLEF, RMT and the government to get us new trains and improved performance on all routes.

PS There's an interesting take on this on Rail News; https://www.railnews.co.uk/news/2019/04/12-rmt-threatens-strikes-and-mps.html

RMT threatens strikes and MPs protest as pensions row goes on

Railnews Ltd is not responsible for the content of external sites.

Friday analysis

THE rejection of three franchise bids from Stagecoach and another from Arriva over pension provisions has ignited new industrial tensions (writes Sim Harris), with the RMT now threatening national action over what it sees as a risk to the rights of staff.

Meanwhile, transport secretary Chris Grayling has come under fire from MPs over his decision to disallow what the Department for Transport is describing as ‘non-compliant’ bids.

The Railway Pensions Scheme has a funding gap of as much as £6 billion, and Mr Grayling wants operators to take responsibility for it – a stance which Stagecoach chief executive Martin Griffiths is describing as a ‘shock’.

There is no suggestion that Stagecoach has been permanently banned from franchise bidding, in spite of some reports which imply otherwise, but it has certainly lost the competitions for East Midlands, South Eastern and the West Coast Partnership. Indeed, the East Midlands franchise was awarded to Abellio, even as Stagecoach was being shown the door.

Its exclusion from West Coast has effectively banned Virgin as well, because Stagecoach, SNCF and Virgin had formed a partnership to bid for the West Coast Partnership, which is planned to run throughout the 2020s and is also set to include operating the first phase of HS2.

The RMT is concerned that the row is now putting railway pensions at risk, and has said national industrial action is on the cards.

The union’s general secretary Mick Cash warned: ‘No one should be under any illusions. The pension rights of RMT members are not there to be used as bargaining chips in a row between the train companies and the Government. Any threat to our members’ pensions will be met with ballots for action and we will co-ordinate any response across the country.

‘This situation is deadly serious and we are preparing to fight if need be and the Government and the train companies should wake up to that fact.

‘We are demanding immediate assurances that the pension rights of our members will not be threatened in any way.’

For transport secretary Chris Grayling, the dispute has provided another opportunity for his critics and prompted fresh calls for his resignation.

In the Commons on Thursday Labour’s Clive Betts, who represents Sheffield South East, had some urgent questions:

‘How much, in total, are the Government trying to cover in costs through the franchising process? When were the bidders notified of the requirement—was it at the beginning of the process?—and why was no one else told about it? Are any other companies refusing to cover such costs? Are any other franchises affected? If they are, what will be the effect on competition within the franchising system?’ he asked.

Rail minister Andrew Jones responded: ‘Stagecoach has acknowledged to the Department that it had bid non-compliantly. We have received offers from other bidders in all competitions that are fully compliant in providing the required pension arrangements for railway workers so, to answer the hon. Gentleman’s question on whether this means the bid process is failing and others are refusing, clearly they are not because we have a compliant bid that won in good form.’

Labour’s shadow transport secretary Andy McDonald was not reassured, saying: ‘This Government, by sleight of hand, are trying to reduce their support for the railways pension scheme. They are trying to pass these costs on to the private sector. That is why both Stagecoach and Arriva defaulted on their bids for East Midlands. The rail industry has a plan to reduce the deficits, yet the Government have ignored that and are attempting to bulldoze through changes without consultation. That is reckless. It will concern rail workers and worsen the rail service for passengers. What discussions were there with the trade unions? Moreover, given that Keith Williams has been instructed to conduct a root-and-branch review, why has such a lengthy franchise been awarded before the Williams review reports later this year?’

Mr McDonald also asked if the rejection of Stagecoach was ‘payback’ for the failure of Virgin Trains East Coast. Mr Jones told him that was ‘nonsense’, adding: ‘Do I think the franchising system is over? Absolutely not. I think we need to look at how it will evolve in future, and that is what the Williams review is doing.’

Alan Brown, who represents Kilmarnock and Loudoun for the SNP, was concerned about Mr Grayling’s position now. He said: ‘Many of us have called for the transport secretary to resign. Now we have the irony of the transport secretary threatening the Prime Minister to resign over her position on Europe. Will he follow through on his threat, or will the Government take action and make the secretary of state resign and shake up the Department?’

Again, Andrew Jones said that was ‘just complete nonsense’.

The rail minister was also keen to emphasise that the present divisions over pensions need not be permanent, telling MPs: ’Stagecoach has played an important role in our railways, and we hope it will continue to do so after the conclusion of the rail review. However, it is entirely for Stagecoach and its bidding partners to explain why it decided to ignore established rules by rejecting the commercial terms on offer.’

Stagecoach Group shares lost almost ten per cent on Thursday. On Friday morning at 08.20 they were down another 1.8p, to stand at 122.20.

 

[RT4038]

The pensions issue is going to come back to haunt many who have been blind to the implications of actions going back decades. I may not agree with the hyper-sensitivity of some unions and their willingness to strike at the drop of a hat, but this issue is going to impact on their members as they approach their retirement. Fortunately ASLEF and the RMT have seen it coming and are getting prepared. I hope it won't paralyse the railways yet again. Stagecoach and Arriva have seen the writing on the wall. Abellio it seems either haven't, or have a cunning plan

In the early 1980s most big pension funds were well into surplus. Terms differed but essentially most employees could look forward to a pension based on half or 2/3 of final salary, with half of that going to their widow or partner for life. Some funds were non-contributory but most required a percentage to be paid out of salary to the pension fund. Many employers eyed those surplus funds avariciously. They were bound to top up pension pots that were short, why not take out when in surplus?

The employer I was with decided it wouldn't pay us a cost of living pay rise one year. The week before Christmas it made that announcement, but said the staff would still get a 2.5% rise. Simple really. The employer would take over the 2.5% staff contribution to the pension fund and guarantee to keep it funded in perpetuity. That went OK for a few years. The fund was still over funded and the employer was saving large sums each year. That's when they came up with another bright idea. Enhance offers to those taking early retirement and strip out all the older employees on top salaries. Almost everyone over 50 took the hint and left. By which time the government had cottoned on to the riches to be looted and a certain chancellor also took advantage.

By which time surpluses very soon started becoming deficits. Surpluses had been built up to cover future bad investment years. Now we had some bad years and the value of investments fell. Companies started going bust. Their staff found their pension funds had been stripped leaving them without the pensions they'd expected. The Pension Protection Fund lifeboat picks up a little for them, but a long way short of what they expected to get. Anyway, more and more employers have ditched their final salary schemes. Every day we hear of another firm unable to meet it's pension liabilities.

50 years ago a pension was part of the remuneration package, deferred income. The railway has been slow to adapt the practices forced on most of the British work force, almost certainly because the unions are so militantly strong. It's a battle the unions may find hard to win, now. Nevertheless it's one Stagecoach and Arriva seem to foresee. Best to leave the field for now and let others get any fighting over.

I hope I'm wrong and that Abellio do indeed have a cunning and cost effective plan to work harmoniously with ASLEF, RMT and the government to get us new trains and improved performance on all routes.

PS There's an interesting take on this on Rail News; https://www.railnews.co.uk/news/2019/04/12-rmt-threatens-strikes-and-mps.html

I think there were also some other forces at work. Employers were increasingly having to compete with firms without such generous pension schemes. The demographics were changing and employees (and their spouses) were living longer, meaning the old assumptions of pension costs were no longer valid (and more expensive) The rules regarding valuation of pension fund reserves became tighter and more risk averse. Accounting rules changed so the open ended commitment of companies to fund deficits in pension funds had to start appearing on balance sheets, which had enormous implications on the financial well being of companies. Defined benefit schemes could no longer be afforded.

 

[Killingworth]

I think there were also some other forces at work. Employers were increasingly having to compete with firms without such generous pension schemes. The demographics were changing and employees (and their spouses) were living longer, meaning the old assumptions of pension costs were no longer valid (and more expensive) The rules regarding valuation of pension fund reserves became tighter and more risk averse. Accounting rules changed so the open ended commitment of companies to fund deficits in pension funds had to start appearing on balance sheets, which had enormous implications on the financial well being of companies. Defined benefit schemes could no longer be afforded.

Quite, but the average employee was, and largely still is, blissfully ignorant of the longer term implications. I suspect many who oversaw the changes in government, companies and financial services did not appreciate their combined effect for society. Many more older people will be requiring other state handouts to make up for having lower pensions income. However, that's a massive topic more suited to a financial services, political or business forum.

My immediate concern is the fallout from the East Midlands franchise award. I wonder when Abellio discovered their two rivals had chosen to ignore the pensions issue and had submitted non-compliant bids? If they had known the other two were going to do that might they have chosen to do the same - leaving the DfT with a lot of egg on face. Who knew, or suspected, what, when and where may be providing work for the legal profession now, but we'll probably not hear the half of it for a few years yet. Abellio may be celebrating a victory this week, I just hope it won't prove to be a poisoned chalice.

 

[Robertj21a]

I'd missed that - the other bid was definitely also non compliant ?

 

[Wolfie]

this is not yet a contract. This is the winning the right to enter into contract. There is a difference!



But they haven't. That is the point. The rules have been followed in a professional manner. As i said: Lets see if Stagecoach sue.

Stagecoach may not sue now. They may, however, put DfT on notice that they will do so if DfT, having disqualified them, awards a contract and then makes changes to lift the pension burden in Abellio later.
DfT's record in recent litigation has been woeful. DfT and professional in the same sentence is novel...

 

[ainsworth74]

DfT's record in recent litigation has been woeful.

Oh come now, that's just singling out one department! The entire Government is managing to get itself hosed in case after case. The DWP keep losing, the Home Office lost one recently as well and I doubt I'll need to look to hard to find other departments managing to get themselves a good kicking due to their own ineptitude

 

[LOL The Irony]

Oh come now, that's just singling out one department! The entire Government is managing to get itself hosed in case after case. The DWP keep losing, the Home Office lost one recently as well and I doubt I'll need to look to hard to find other departments managing to get themselves a good kicking due to their own ineptitude

To be fair, most forum members probably weren't alive when the whole government wasn't inept.

 

[RealTrains07]

Shame the stagecoach situation will be one of those things were First are sitting their rubbing their hands together laughing.
Its a shame about stagecoach, dont particularly want a First run west coast thanks. They are unreliable after their awful performance with TPE and FGW.
and lets be honest they have been waiting for the chance to win the West Coast for years

 

[Mathew S]

Shame the stagecoach situation will be one of those things were First are sitting their rubbing their hands together laughing.
Its a shame about stagecoach, dont particularly want a First run west coast thanks. They are unreliable after their awful performance with TPE and FGW.
and lets be honest they have been waiting for the chance to win the West Coast for years

I'm no fan of Stagecoach (mainly because I think Brian Souter is an obnoxious biggot who doesn't receive the hate and vilification he, in my opinion, deserves) but, I do not want First anywhere near the northern half of the west coast. Competition between Virgin and TPE has driven down the cost of journeys from Greater Manchester to Scotland - a regular trip for me - massively over the last couple of years. I can do Manchester/Wigan/Preston to Glasgow for a roughly half of what it cost me four or five years ago, and that's despite the fact that I had a railcard then, and don't now. If First run both franchises, well, that's just returning to a monopoly, which isn't good for anyone, least of all customers.

The current incarnation of Virgin has it's faults, of course, but the service they run suits me well, and means I can get to where I want to go quickly, cheaply, and with a smile on my face. Plenty of people on this forum seem to hate them for having a sense of humour but, you know what, at 5.45am when I've had fours hours sleep if I'm lucky and I'd rather be in bed than on the way to work, any company that can put a smile on my face is alright in my book.

 

[tbtc]

I do enjoy the complaints that Virgin's adverts boast about Virgin being good, presumably from people who don't understand the point of adverts.

Much better to have "grey" franchises like most Abellio/ Arriva/ Go-Ahead ones which don't do anything ghastly like shout about their service being good, to try to attract new passengers, eh?

Same old same old. “Defined benefit pension schemes are unsustainable” except for those at the top. Can’t imagine most MP’s or top civil servants will be keen for their defined benefit pensions to be scrapped. All other mere mortals are destined to work until you drop or maybe until you can just about afford to retire with no disposable income to enjoy your retirement.

The Principal Civil Service Pension Scheme moved from a Final Salary one to a Career Average one a few years ago, for all future accrual. Same goes (I believe) for the Local Government Pension Scheme, the NHS Scheme and all other equivalent public sector schemes. And inflation downgraded from RPI to CPI too.

Meanwhile the Railway scheme remain one of the few Final Salary schemes open to new members and to future accrual.

(Worth pointing out that Network Rail moved away from Final Salary - for future accrual - a few years ago, in fairness)

The MP scheme is still final salary (AIUI), but as things stand, employees of (say) Greater Anglia have a final salary pension and "top civil servants" don't.

(I'm not arguing what should be the case or what shouldn't be the case, just pointing out that the "top civil servants" aren't getting as good a deal as most TOC workers)

Stagecoach may not sue now. They may, however, put DfT on notice that they will do so if DfT, having disqualified them, awards a contract and then makes changes to lift the pension burden in Abellio later.
DfT's record in recent litigation has been woeful. DfT and professional in the same sentence is novel...

This bears repeating.

May be similar to the way Eurostar got money out of the Government for the way that they handled that botched ferry contract - got to be very careful if Abellio start to demand a moving of the goalposts (because they don't like the blank cheque pension demands that the other two bidders didn't want to commit to).

 

[Killingworth]

All of this makes one wonder if this government wants to clear as many desks as possible, no matter how well considered the decision may be, Williams or no Williams. At least by getting on with this franchising new rolling stock should be ordered, and in 4 years we may be travelling in them.

 

[Wolfie]

Oh come now, that's just singling out one department! The entire Government is managing to get itself hosed in case after case. The DWP keep losing, the Home Office lost one recently as well and I doubt I'll need to look to hard to find other departments managing to get themselves a good kicking due to their own ineptitude

Given that l spend my working life involved in handling policy aspects of litigation against one area of a Govt Dept (having previously done the same in another Govt Dept, neither DfT) l better not comment.... lol

 

[Wolfie]

All of this makes one wonder if this government wants to clear as many desks as possible, no matter how well considered the decision may be, Williams or no Williams. At least by getting on with this franchising new rolling stock should be ordered, and in 4 years we may be travelling in them.

I wouldn't be surprised if you were being hopelessly optimistic and substantial litigation follows..

 

[Wolfie]

I do enjoy the complaints that Virgin's adverts boast about Virgin being good, presumably from people who don't understand the point of adverts.

Much better to have "grey" franchises like most Abellio/ Arriva/ Go-Ahead ones which don't do anything ghastly like shout about their service being good, to try to attract new passengers, eh?



The Principal Civil Service Pension Scheme moved from a Final Salary one to a Career Average one a few years ago, for all future accrual. Same goes (I believe) for the Local Government Pension Scheme, the NHS Scheme and all other equivalent public sector schemes. And inflation downgraded from RPI to CPI too.

Meanwhile the Railway scheme remain one of the few Final Salary schemes open to new members and to future accrual.

(Worth pointing out that Network Rail moved away from Final Salary - for future accrual - a few years ago, in fairness)

The MP scheme is still final salary (AIUI), but as things stand, employees of (say) Greater Anglia have a final salary pension and "top civil servants" don't.

(I'm not arguing what should be the case or what shouldn't be the case, just pointing out that the "top civil servants" aren't getting as good a deal as most TOC workers)



This bears repeating.

May be similar to the way Eurostar got money out of the Government for the way that they handled that botched ferry contract - got to be very careful if Abellio start to demand a moving of the goalposts (because they don't like the blank cheque pension demands that the other two bidders didn't want to commit to).

Your last para is exactly what l had I mind..

 

[GrimShady]

Good riddance, looking forward seeing the back of Virgin too!

 

[Killingworth]

I wouldn't be surprised if you were being hopelessly optimistic and substantial litigation follows..

I may well have had my tongue in cheek when writing that

 

[Wolfie]

Good riddance, looking forward seeing the back of Virgin too!

Yeah, cos GoVia, Worst etc have been so good...

 

[Hadders]

Virgin have been a competent operator of the West Coast franchise and I think it will be a shame to see them go.

I wonder what the chances are of Virgin Rail Group re-naming themselves and bidding for other, less glamorous franchises that don't fit with the Virgin image.

 

[GrimShady]

Yeah, cos GoVia, Worst etc have been so good...

Looking forward to seeing them go too......eventually.

 

[AndrewE]

Virgin have been a competent operator of the West Coast franchise and I think it will be a shame to see them go.

Yes, but I wonder how much this is down to the historical accident of the length of time they have been doing the job? Anyway, I get the feeling that the quality and reliability of the Pendolinos is slipping (now that Longsight has been de-staffed?)
I dread a succession of changes, new managements with bright ideas (and investors to satisfy.)
It's a utility, infrastructure. It has to work and reliably too, or the country is damaged in addition to the individuals who suffer first.

 

[Helvellyn]

So the Sir Brian Souter bashing continues. Do people not realise he stepped away from day to day operation of Stagecoach a few years ago? Yes he is Chairman and his family remain key shareholders but the CEO is Martin Griffiths. That is who has day to day operational responsibility and accountability.

 

[Mathew S]

So the Sir Brian Souter bashing continues. Do people not realise he stepped away from day to day operation of Stagecoach a few years ago? Yes he is Chairman and his family remain key shareholders but the CEO is Martin Griffiths. That is who has day to day operational responsibility and accountability.

Frankly, he deserves all the "bashing" he gets in my book. And as long as he is chairman and therefore, one would assume, handsomely remunerated out of Stagecoach's coffers, it will irk me to have no option but to put any money at all into that company.

 

[Bletchleyite]

A few (opportunistic) individuals making exceptions of themselves doesn't make Defined benefit pension schemes any more affordable for all the rest of us other mere mortals though (unfortunately).

Fundamentally, final salary pensions simply don't work because investments are unstable and because the working population is declining. The State pension, which is defined-benefit, is having similar issues.

That one self-serving member of senior management manages to fund his is neither here nor there.

 

[Bletchleyite]

Frankly, he deserves all the "bashing" he gets in my book. And as long as he is chairman and therefore, one would assume, handsomely remunerated out of Stagecoach's coffers, it will irk me to have no option but to put any money at all into that company.

I don't like his opinions on LGBT... issues, though as I am strongly in favour of free speech he is entitled to them just as I am entitled to say they are wrong. But that doesn't mean he is not competent to run a large public transport company - he demonstrably is. Though I do tend generally to separate work from personal life quite strongly - the only thing relevant to his work is whether he can do his job, nothing else. I'd be unlikely to want to be his friend, but that's neither here nor there to the ability to do his job.

 

[LNW-GW Joint]

May be similar to the way Eurostar got money out of the Government for the way that they handled that botched ferry contract - got to be very careful if Abellio start to demand a moving of the goalposts (because they don't like the blank cheque pension demands that the other two bidders didn't want to commit to).

Eurotunnel, actually (Getlink), not Eurostar.
The lifting of the immediate "no-deal" Brexit threat means that DfT will have more time for the day job of running UK transport.
Hopefully that means some delayed rail decisions will now be made.
Until October, that is.

 

[hibtastic]

I will absolutely miss Virgin Trains when they go. I travel on a weekly basis between Manchester and London and have enjoyed the vast majority of my journeys.

I am big fan of Virgin though, I love the way they try to make things a bit more fun than the drearily boring other TOCs like Abellio, Africa etc.

I hope the DfT knows what it is doing but sadly I am sure that this will not be the case!

 

[Mikey C]

Not a massive fan of a lot of the Virgin hype and "wackyness" BUT do respect the fact that they out some effort into running the franchise rather than just doing the bare minimum