It was not a great start for the soon to be nationalised Eastern mainline company. The media were told early yesterday morning, whilst the Commons only had official confirmation and a Minister to question twelve hours later. The statement wasn’t worth waiting for. The Minister had no figures of how much revenue would fall, how much of the promised premium payments would be lost, how much capital they would need to put in, or how they would improve the performance and lower the cost of the service.
This is the second franchise that has gone wrong, implying the government’s system for letting these contracts is bad. Taxpayers have had to spend a lot of money on contract negotiation and due diligence on the companies taking them out. There won’t be any explanation or rebates on all that wasted money.
According to the Commons Minister (who simply read out his boss’s statement from the Lords, including referring to his audience as lordships) all will be well. He told us the company is profitable, that taxpayers will enjoy a period of the revenues from the franchise before selling it off again to another private sector company. There was no recognition of what a financial body blow this is to his railways budget. Once again we have a government rushing to nationalise something they clearly do not understand, which will turn out to be a worse financial deal than they let on. There was no sign yesterday of any controlling mind amongst Ministers who knows how to make this proposal work.
What should they have done? They should have taken more security and negotiated a tighter deal when they set up the franchise in the first place. They should have spent more time seeing what the relative cost of dealing with the existing franchise holder would be compared with taking it in house. I am not persuaded they did the homework or came up with the best answer for taxpayers. Given that they signed a bad contract originally, they should have spent more time examining all the options to mitigate their losses. Yesterday’s statement looked like a fit of pique allied to playing to the nationalising gallery.