Transport secretary outlines the new public-private partnership models which could be applied to the East Coast franchise in two years’ time

 

Transport secretary Chris Grayling appeared before MPs last week

 

Transport secretary Chris Grayling has indicated that he will not let the next East Coast rail franchise under a conventional private sector franchising contract.

Giving evidence to the Commons transport committee last week on his plans for the new East Coast Partnership arrangement which will start from 2020, Grayling said commercial risks which had led to the failure of the last three franchises meant a new approach would be needed.

“I do not think we can go back to the conventional paradigm on this railway,” he told MPs. “It has been tried three times and it has failed three times. I am not going to be the secretary of state who says, ‘Well, let’s just re-let the franchise again’. I am trying to do something different.”

Grayling said there would be benefits to private sector involvement when the Department for Transport’s responsibility for running the train service as ‘operator of last resort’ ends in two years’ time, particularly with regard to providing investment funding and specialist skills. However, the private sector’s role may not include full, or any, responsibility for train operation.

Options which Grayling said the DfT is considering include:

  • The public sector retaining a majority shareholding in the next East Coast train operating company, but with investors invited to take an equity stake in an ownership structure similar to Manchester Airport Group;
  •  The state retaining train operation in the public sector, but with private sector investment in specific infrastructure and operational projects;
  •  A degree of employee ownership.

My aim is that it should be public-private partnership but in a different form than has taken place up to now

“There are a number of different models we could adopt. We are working through different options now,” commented Grayling. “My aim is that it should be public-private partnership but in a different form than has taken place up to now. The example would be bringing in private capital to invest in digital signalling as part of the partnership, and an employee stake in the business.”

He reiterated: “I am not planning simply to return the franchise to the private sector in the way that has happened in the past.”

In addition, Grayling indicated that the structure of the East Coast business would be likely to change with Great Northern services, currently part of the GTR franchise, brought into the company. This would provide the East Coast Partnership with responsibility for running all services into King’s Cross, reducing operational complexity.

While Grayling said there would be radical change on the East Coast, he told MPs that wider franchising policy would continue to involve letting conventional franchises with requirements to integrate management more closely with Network Rail. One evolutionary change under active consideration is the case for longer rail franchises.

He also told MPs that the DfT would not be progressing proposals to create a new Devon and Cornwall franchise by separating routes from Great Western, after examining consultation responses.

 

This article appears inside the latest issue of Passenger Transport.

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