Shropshire Star

Virgin’s fight for right to run trains across region finally hits the buffers

The High Court has backed a decision to block Stagecoach and Virgin from bidding for the right to run trains in the West Midlands.

Published
Virgin Trains ran for many years on the West Coast mainline in partnership with Stagecoach but was barred from bidding again

The rail operator, which operated as Virgin Trains, sued the Department for Transport for disqualifying it from bidding for the West Coast franchise, as well as franchises in the East Midlands and South Eastern.

It was barred from bidding for refusing to accept the risk of pensions liabilities proposed by the Government.

Arriva had also brought legal action against the Government for disqualifying it from bidding for the East Midlands franchise, but reached a confidential settlement just before the start of a trial in January.

The West Coast franchise went to Avanti West Coast – a partnership between Aberdeen-based FirstGroup and Italian firm Trenitalia. The East Midlands franchise was ultimately awarded to Abellio, while the competition for the South Eastern franchise was scrapped.

Stagecoach, which bid for the West Coast franchise in partnership with Virgin and French national railway SNCF, claimed the Government acted unlawfully in the way it conducted the franchise competition process.

But in a judgment delivered remotely, Mr Justice Stuart-Smith dismissed the claims, ruling that all bidders for the franchises “should and would have realised that material non-compliance on pensions gave rise to a serious risk of principled disqualification”.

He said there was “no indication and no reason to believe” that the terms proposed by the Government “were anything other than final or that they invited counter-proposals”.

The judge added: “Nor can I accept that uncertainty of outcome engaged the principle of transparency so as to render the imposition of the risk upon the franchisees unlawful.”

He said “uncertainty of outcome is the essence of risk - and bidders have to deal with commercial risk in any substantial procurement”, adding: “Their ultimate protection is always to decline to bid, as it was in this case.”

In a statement after the ruling, a DfT spokeswoman said: “We strongly welcome this decision, which finds our franchise process was fair, our conduct was transparent, and the disqualification at the heart of this case was proportionate.Our focus now rightly remains on tackling the Covid-19 pandemic, helping ensure the safety of passengers, and working to build a railway that works for everyone as we begin the process of recovery”

Important issues

A Stagecoach spokeswoman said: “We believe there were important issues which needed to be determined by the court to help secure the future of the country’s rail system and our view remains that we were right not to accept the risks in these contracts. Nevertheless, while we are disappointed at the ruling, we accept the decision and move on.

“The country is facing a huge challenge in fighting the Covid-19 pandemic, and all of our energies are focused on ensuring our transport networks help the national effort at this critical time.”

A FirstGroup spokesman said: “We welcome the ruling and the clarity it brings. We considered all aspects of our successful West Coast Partnership bid carefully and with a sensible and responsible approach to risk.”

He added that the firm’s “current focus is on supporting our communities through the current pandemic”.

Manuel Cortes, general secretary of the Transport Salaried Staffs’ Association, said: “Thankfully the privateers’ gravy train has finally hit the buffers. The Government now needs to finish the job by bringing our railways lock, stock and barrel into public ownership. It’s ludicrous that since the start of the coronavirus health emergency, taxpayers have supported our railways with £3.5 billion whilst the privateers have been allowed to make a two per cent profit.”

Privatisation experiment

“If this wasn’t bad enough, the eye-watering six-figure salaries of the private company fat cats running our railways are now being met by the public purse.

“This whole episode in the courts shows us again that it is long past time to draw a line in the sand and end the Tories’ failed Frankenstein privatisation experiment.”

RMT general secretary Mick Cash said: “This ruling completely exposes how broken the failed privatised rail franchising system is when fat cat train operating companies can sue the Government at will and huge amounts of taxpayers’ money is wasted on legal fees.

“The fact that Stagecoach Group Plc wanted all the lashings and profits of the railway without any of the risk of the Railway Pensions Scheme is one more nail in the coffin of the privatised system.

“The Government must now act quickly and work with the unions and industry to secure the future of the Railway Pensions Scheme, which has been questioned not because of the actual funding position of the scheme but due to the privatised ownership model.

“It’s vital the Government now does the right thing and brings our railways into public ownership and ends this 25-year-old free-market farce once and for all.”

John Thomas, director of policy at industry body the Rail Delivery Group, said: “The priority for rail companies right now is to continue to support communities and businesses through the coronavirus pandemic.

“Today’s judgment on previous franchise bids has been accepted by both parties and the industry wants to work with Government to ensure a reformed railway, which we have been calling for, can harness the best of both the public and private sectors so that we can deliver for Britain.

“We continue to work with the Pensions Regulator, DfT and the unions with a view to agreeing a sustainable pensions framework for the train operator sections of the Railway Pensions Scheme.”