First’s risky win highlights fundamental problems with the rail network

Euston, we have a problem. Richard Branson found out today that Virgin Trains has lost the rail franchise for the West Coast Mainline to First Group. From 9 December, First plans to ‘offer substantial improvements in the quality and frequency of services’ on one of the country’s key arteries. This overhaul will bring in 11 new trains and 12,000 extra train seats by 2016. Branson is sore about his company’s loss, and has attacked the government’s ‘insanity’ for handing over the network to First:

Under our stewardship, the West Coast Mainline has been transformed from a public liability into a valuable asset for the UK, worth many billions of pounds.  The service is a British success story and one to put up against rail companies around the world. It is a great shame that such a strong track record has been discounted in the evaluation process for one of the UK’s most important infrastructure assets. The country’s passengers, taxpayers and the West Coast employees deserve better.  These achievements have counted for little – as this is the fourth time that we have been out-bid in a rail tender. On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically’

The billion dollar question is whether First will be able to deliver its upgrade promises and still turn a profit. Virgin offered £4.8bn to run the route till 2026, compared to £5.5bn for First Group — ‘a very very aggressive bid’ in the words of Virgin’s Tony Collins. First’s chief executive Tim O’Toole (who performed well as head of London Underground 2003-2009) hit back that his company ‘has a track record of winning deliverable bids’ and their bid represented the ‘fairest deal’ for taxpayers’. But if £5.5bn is too much of a burden, First run the risk of treading the same path as National Express did on the East Coast service. The long-standing GNER service was terminated thanks to National Express’ overly ambitious bid to run the network for nine years. Just two years in, the franchise collapsed and the country’s second busiest train line was nationalised. There are differences between the bids — the National Express package had very little spare capacity while First’s 10 per cent annual growth does not seem unreasonable. There is the matter of High Speed 2. As we reported a few weeks ago, plans for the new network have gone suspiciously quiet. If HS2 doesn’t materialise, the West Coast line faces a problem when it reaches capacity in 2026. If First Group find either of these insurmountable, we will find ourselves sleep walking back to British Rail. What do passengers make of the news? Here’s a selection of tweets: But he official figures from Network Rail tell a different story. The moving annual average of public performance measures — the standard measurement for rail franchise performance — suggests that Virgin Trains has been performing worse than other First Group lines. Although they are very different services, the survey suggests most passengers are not unhappy with First:

This week’s fare increases and today’s takeover both highlight a key issue with our rail franchising system. Money continues to be the main motivator for handing out franchises, while quality of service comes second. Margaret Thatcher said that a private rail network would be ‘a privatisation too far’. Since 1994, the numerous safety incidents and huge above-inflation fare rises suggest she may have been right.