Gwyn Topham, The Guardian, March 2, 2015
The first repainted, rebranded and reprivatised Virgin Trains East Coast train left London Kings Cross station for Edinburgh at 11am on Monday, its new red-and-white livery signalling – according to one set of politicians and businessmen – a fresh chapter and better services for passengers.
After five years of public ownership, that view is disputed by unions and Labour, for whom East Coast became totemic in the argument over who should run rail transport.
Successful and profitable but with its financial returns going to the government rather than shareholders, East Coast’s significance was not lost on the coalition. They put it at the top of the franchising queue ahead of the general election.
However, the transport minister Claire Perry, at Kings Cross for Virgin TEC’s official launch, insists: “It’s been a whipped-up political controversy.” Labour had time in power to change the system had it wished, she says, adding that East Coast under the state-owned Directly Operated Railways (DOR) was never intended to be an ongoing operating company. “It wasn’t able to make the investments like the £140m of private sector money that will flow into this franchise.”
Over its eight-year franchise the new operator – a joint venture 90% owned by Stagecoach but with Richard Branson’s licensed brand – will bring more direct links to the capital and cut journey times after a new fleet of trains is introduced from 2019. The consortium will invest £140m, partly spent on refurbishing the existing fleet and improving stations.
It should also pay £3.3bn in premiums to the Treasury, says David Horne, managing director of Virgin Trains East Coast. “When you look at [DOR] paying £1bn in five years, that’s going to be a good deal for taxpayers.”
So what exactly is the magic touch that a private operator brings to make this all possible? On the first rebranded train on Monday, Horne says: “It’s a commitment to customer service.” If that concept seems nebulous, Horne cites a new £3m “customers and communities” fund for investments and improvements along the line. “We’re up for anything. When you bid for a franchise you’re looking forward to think what are customers going to need, but this fund gives a way to do different things that we haven’t thought of that customers may suggest.”
The remaining train exteriors will be retouched by August; addressing the ageing interiors will take longer, with refurbishment starting over two years from August. The franchise will include 65 new trains in 2019 under the Intercity Express Programme, ordered by the government from Hitachi, part-manufactured in the new Newton Aycliffe assembly plant in Co Durham. That replacement fleet means 50% more seats and a cut in journey times from London to Edinburgh to four hours. Horne says his firm’s experience will help: “Between them Stagecoach and Virgin have introduced more trains to the new network than any other operator.”
One key contention of private operators’ supporters is that their innovation and customer service has increased passenger numbers. Pressed for specifics, Perry says: “There will be free Wi-Fi, customer offers. There will be Nectar points. When is the last time that you heard of good old British Rail offering any kind of customer incentives?”
Even if the political divide can be encapsulated in a supermarket loyalty programme, the management of East Coast under DOR claims to have “relentlessly focused” on customers (it did, in fact, operate a rewards points scheme). In a valedictory email to stakeholders last week Karen Boswell, the outgoing managing director, trumpeted a record that saw the company garner awards and plaudits. She notes: “We developed a strong East Coast brand from scratch and we created a relentless focus on the customer throughout our business … and we’ve been able to achieve one of the highest customer satisfaction ratings of any franchised long-distance operator in the country.”
A second argument is that staff will benefit. Perry says: “The staff on East Coast, I’ve talked to dozens of them, are really excited to be working with two very customer-facing brands.”
Horne adds: “One member said he’d wished we’d taken over years ago, I certainly haven’t detected regret that they’re not working for DOR any more. Most of them are looking forward to working for us because we’re going to provide a lot of investment and opportunities for them in the future: we have plans to invest in customer service training and an overall plan to develop the businesses.”
Boswell also claims the support of staff in her email however: “We made significant investments in our people and assets; and above all, we rekindled a company spirit amongst our people ... we’ve been able to achieve an employee engagement score that is virtually unparalleled in the rail industry.”
The last private operator to run the franchise was, briefly, National Express, which handed the keys to DOR in 2009 after failing to meet its payments as the financial crisis hit. Refranchising might finally consign the transport operator’s ignominious moment to history, although Dean Finch, the chief executive who joined in 2010, says: “I don’t believe any journalist is going to let National Express forget that in my lifetime.” He is, unsurprisingly, pro-privatisation: “The private sector profit take is not taking out a large wedge of money. In return it has contributed a vast amount.”
Despite East Coast’s success as one of only two firms to make a net contribution to government coffers over the last two years, its payments exceeding its subsidy, Finch says: “The reflections on improved service, and punctuality, are only part of the story. [Was] the government getting more back than it would have under the previous contract, more than a private sector operator would have? I don’t think so.” Finch says that East Coast had always been a profitable line, with relatively low leasing costs because of the old rolling stock – making it ripe for any operator.
Now, says Horne: “People here have looked at what Virgin have done on the West Coast line and are excited by the prospect of a similar transformation of services.” The image he uses is “a hotel on wheels”, adding: “There are very few commuters on this line – if people are using it, it’s because they want to, we have to impress them.”
The reaction of staff and passengers at York station on Monday was more prosaic, with few changes yet visible to most except the Virgin stickers in the window, new staff badges and plastic Virgin windcheaters concealing old uniforms to keep out the snow showers.
One passenger had travelled down from the north-east, but declined to be named, saying: “I’m leftwing so I’d rather they renationalised, but I’m going to get on the train whoever’s running it. I can’t imagine it will make any difference to the service, just the money will be going to different people.” Some staff – especially on board – are hopeful for change; others say that the ownership was less of an issue for employees than politicians. One commented: “A job’s a job – makes no difference, so long as we get paid at the end of the month.”
Labour has now pledged to legislate swiftly for rail reform, with Michael Dugher, the shadow transport secretary, describing the end of East Coast trains as “a hammer blow for passengers, taxpayers and employees alike”.
Perry’s retort on Monday was firm: “We don’t talk about having a public sector energy company or a public sector airline.” With the once state-owned British Airways’ parent company IAG forecasting €2.2bn in profits this year, the minister could, however, be on to something. She adds: “I’d like to see the Labour party’s proposal, Dugher Airlines, which I’m sure is coming.”
This article originally appeared on guardian.co.uk
This article was written by Gwyn Topham from The Guardian and was legally licensed through the NewsCred publisher network.
