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Fears over train services

PUBLISHED: 09:49 02 July 2009 | UPDATED: 14:18 03 July 2010

TRAIN passengers in the east of England could see improvements put on hold if the government follows through with its threat to nationalise the region's services.

TRAIN passengers in the east of England could see improvements put on hold if the government follows through with its threat to nationalise the region's services.

A bitter public row erupted yesterday between the government and National Express, which operates rail services in East Anglia, with confusion as to whether ministers would be able to seize control of the franchise.

The developments came after National Express said it was preparing to walk away from its East Coast operation - the mainline service that runs between London and Edinburgh, via Peterborough - later this year because it expected to default on its payments for that franchise.

Transport secretary Lord Adonis launched a stinging attack on the rail operator and said the government was preparing to step in and run the East Coast service ahead of putting the franchise up for auction next year. He said the other National Express franchises, including the one in East Anglia, could also be taken into government hands.

A Department for Transport spokesman said any nationalised franchise would see service levels maintained, but he refused to commit the government to further investment.

Two weeks ago National Express said it planned to introduce a faster service between Norwich and London and put extra seats on its mainline trains.

These improvements would be among those threatened, were the franchise to be nationalised.

“We are still looking at this and it impossible to say what will happen,” the spokesman said.

“We are still working out the details and looking at all the options, but I can 100pc confirm that there will be as good a level of service as there is now.”

Lord Adonis, announcing that the government was preparing to take over the East Coast franchise should National Express default, said: “It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging.”

He said that as well as taking over the East Coast operations, the government would be looking at stripping National Express of its East Anglia and C2C London commuter franchises.

“The company has said it does not intend to default on its obligations in respect of these franchises,” he said.

“Notwithstanding this, the government believes it may have grounds to terminate these franchises, and we are exploring all options in the light of the group's statement this morning. In the meantime, we expect National Express to meet its obligations on these franchises in full.

“A company which had defaulted in the way National Express now intends would not have pre-qualified for any previous franchises let by the department. I note that the parent groups of previous franchise failures are no longer in the UK rail business.”

But National Express firmly rebutted the suggestion that a default on one of its franchises would allow ministers to seize control of its other rail operations. It said the government had “no grounds” to do this and would challenge any such attempt in court.

The company said it had “taken and received clear and detailed advice from leading legal counsel upon its, and its subsidiaries', positions under the East Coast and other franchise agreements and is confident that the implication of any [East Coast] default should be confined to the [East Coast] franchise”.

The problems with East Coast began after National Express bid £1.4bn in 2007 to run the franchise until 2015. Falling passenger numbers as the economic downturn kicked in meant the company has failed to bring in the expected revenue, and it is thought that the franchise will report losses of £20m for the first half of this year.

At the time the deal was signed, rail analysts said the company had paid too much, but yesterday National Express insisted the problems were due to a downturn that was unforeseen at the time.

The company has been holding discussions with ministers in a bid to renegotiate the terms of the franchise, but the government's refusal to budge led to yesterday's announcement that a default later this year was likely.


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