Privatisation: Virgin gaming the rail system – lising money, paying dividends

Virgin: leading the pack in health service privatisation.

“… The East Coast franchise was to be terminated three years early in 2020 under a controversial rail strategy announced by Grayling in November, potentially letting Virgin-Stagecoach off the hook for more than £1bn in promised payments to government. The announcement on Monday brought forward the termination of the current contract.

Virgin Trains East Coast admitted overbidding after it pledged to pay £3.3bn to run the service until 2023, with passenger numbers failing to rise in line with expectations. Cancelled infrastructure upgrades by Network Rail meant that a significant number of additional seats on new trains expected after 2020 would not be operating, making the government partially responsible.

However, Grayling risked stoking further anger on Monday by announcing that Virgin would be granted a further direct award, or contract without competition, to run the lucrative InterCity West Coast service, potentially until 2020. The Department for Transport had announced in 2016 that it was expecting to extend Virgin’s contract from this April for a further 12 months, until April 2019, before a new “West Coast Partnership” franchise was awarded, to include the introduction of HS2 high-speed trains from 2026.

Virgin has now retained the contract without competition since the proposed award of the franchise to rival First Group collapsed under a legal challenge in 2012. The west coast has consistently returned large dividends to Sir Richard Branson, who owns 51% of the joint venture, and to Stagecoach, which own 49%, topping £100m in the last two years alone.

Grayling’s announcement prompted fierce denunciation from Labour. Shadow transport secretary Andy McDonald said it was an insult to taxpayers: “What makes me want to weep is he’s giving more gifts to Richard Branson and [Stagecoach founder] Brian Souter. Let’s not forget that these are companies who extracted hundreds of millions of pounds in rigged compensation payments from taxpayers during the upgrade of the West Coast mainline … Similar tactics are now being deployed. Virgin games the system. It’s done it before and it’s doing it again.” …

https://www.theguardian.com/business/2018/feb/05/east-coast-could-return-to-public-sector-chris-grayling-admits