UK: Branson criticises rail franchising system

[John Ashworth]

Branson criticises rail franchising system

SIMON CALDER THURSDAY 08 DECEMBER 2011
Independent

Sir Richard Branson has hit out at the rail franchising system, criticising the government's focus on cost - but promising to pay "billions of pounds" to the Treasury if Virgin Trains retains its grip on the West Coast main line. Its franchise expires one year from today.

The Virgin Group founder was speaking at Euston station, at an event to mark 30 years of tilting trains in Britain; the Advanced Passenger Train made its first abortive run on 7 December 1981, only to be ignominiously towed back to Glasgow Central by a diesel locomotive. It turned out to be the wrong kind of tilting train: in the past decade Virgin Trains has successfully introduced a fleet of Pendolino rolling stock, cutting journey times and increasing frequencies between London, Birmingham and Manchester.

Yet despite doubling the number of passengers carried over the past seven years, there is no guarantee that Virgin will retain its West Coast franchise. After bringing in the first new trains in decades on the cross-country routes via Birmingham, the company lost out to Arriva. Virgin Trains also failed in its bid for the East Coast franchise, due to what Sir Richard called "underbidding". The winner, GNER, had the franchise withdrawn five years ago when it ran into financial difficulties - largely because of over-optimistic forecasts about passenger numbers and revenue.

Sir Richard called for "a beauty parade of innovation and quality", looking beyond the financial benefits to the government: "If you just go for the bottom line, you get the cheapest everything. That's not what people want." He declined to say how much Virgin would bid for the franchise renewal, but said it would run into billions.

The Virgin founder also claimed that "We've got the best rail network in Europe". With France about to open yet another stretch of high-speed track (a new line between Mulhouse and Dijon that is, on its own, longer than Britain's entire high-speed network), this surprised rail experts. But Sir Richard explained that his assertion was based on customer satisfaction, safety and growth in passenger numbers.

Virgin Trains boss says: We'll win west coast rail franchise on customer service

Richard Branson says government should go for quality, not highest bidder as French and Dutch rail operators circle

Dan Milmo
guardian.co.uk, Wednesday 7 December 2011 19.32 GMT

Virgin Trains has staked its claim to renew the prestigious west coast rail franchise by warning the government against repeating the east coast fiasco and awarding the contract to the highest bidder.

Acknowledging that his Virgin empire faces deep-pocketed competition from the French and Dutch state rail operators for the lucrative London-to-Glasgow route, Sir Richard Branson indicated that his company would win if customer service is judged to be an important factor.

Asked to give his opinion of Keolis, backed by France's SNCF, and Abellio, an offshoot of the Dutch national rail business, he said: "State-run companies generally speaking do not do that great a job, I believe."

Virgin Trains is also competing against Aberdeen-based FirstGroup for a 14-year contract, with the winner to be announced next summer.

Sir Brian Souter, whose Stagecoach group owns 49% of Virgin Trains, said he was "not afraid" of big-spending rivals but warned the government against triggering a repeat of the east coast bidding contest in 2007, when National Express knocked out Virgin with a successful £1.4bn bid. National Express handed back the route less than two years later after admitting that it could not afford the escalating payments set out in the contract.

"We have lost bids before like east coast mainline based on someone overbidding," said Souter, adding that the Virgin Trains bid would have "transformed" the London-to-Edinburgh line. "We just pray that does not happen again," he said.

Branson said that Virgin's bid for a new contract would represent a "late Christmas present" for George Osborne. "Great Britain urgently needs investment and we are willing to deliver that investment. I don't think the chancellor realises that we will bring a late Christmas present when we bid next year, bringing literally billions of pounds to his coffers when this country desperately needs cash."

The government was criticised last month for selling Northern Rock to Branson at a loss of at least £400m on the £1.4bn that the taxpayer pumped into the stricken lender during the credit crunch. One MP said that the entrepreneur had been sold the bank "for a song", as Branson pledged that the revamped business would offer small loans to the poor under the Virgin Money brand.

However, Virgin Trains says it has generated strong returns for the taxpayer as well as improving services on a route that will carry 30m people this year. According to Virgin, it pays a premium to the government of £160m a year, which could result in total payments of more than £2bn over the course of a 14-year contract.

The west coast route has also been profitable for Branson. Since launching its trains business, his Virgin empire has earned dividends of more than £188m, including £17.8m last year, a total that the company says rewards the "risk" it took in running services on a line that was beset by engineering problems for much of the past decade.

Bob Crow, general secretary of the RMT trade union, described the franchise as a "one-way ticket to the bank" for the entrepreneur.

Branson said that Virgin Trains was awaiting the Department for Transport's outline of the bidding criteria, but promised passengers "radical" changes if its bid were successful.

"We have radical ideas for the new franchise and we are still waiting to see whether the new franchise will really be based on the bottom line, and whether innovative ideas will be taken into account," he said.

A government spokesman said: "All bids are judged on their affordability, deliverability and their value for money for passengers and the taxpayer."