West Coast rail fiasco will cost taxpayers a ‘significant’ amount, says Government report

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TAXPAYERS face a ‘significant bill’ as a result of the botched West Coast rail process, according to a Government watchdog.

The National Audit Office (NAO) report also criticised the Department of Transport for a cost cutting exercise which led to 500 staff losing their jobs and to the lose of expertise which might have prevented the fiasco.

Andrew Pakes with Maria Eagle

Andrew Pakes with Maria Eagle

It was one of two reports published yesterday into the fiasco, which saw FirstGroup win a franchising competition to run the service only for errors in the process to see the decision scrappped.

The Government later granted exisiting operator Virgin Trains a 13 month extension to its contract, with the intention of re-tendering for a short-term franchise after that, before running a competition for the long-term contract.

But yesterday Virgin’s contract was extended to 23 months.

As well as the NAO report, an internal Department of Transport investigation was published yesterday. That report blamed ‘organisational changes and resourcing constraints’ for the botched process, which could cost up to £100million to resolve.

Both reports concluded that the loss of institutional knowledge and experienced staff members with knowledge of franchising had exacerbated problems.

It was only when Sir Richard Branson, whose Virgin Trains’ company had lost out to FirstGroup in the bidding, mounted a legal challenge to the decision that the flaws in the process were discovered.

The DoT report said errors had been made due to inaccurate risk calculations on the merits of the two bids, while the NAO said staff had been confused by the bidding process.

NAO head Amyas Morse said: “Cancelling a major rail franchise competition at such a late stage is a clear sign of serious problems.

“The result is likely to be a significant cost to the taxpayer.”

During a visit to Milton Keynes yesterday, shadow transport secretary Maria Eagle said the decision to extend Virgin’s contract was good news for passengers,

But she added that Transport Secretary, Patrick McLoughlin, had “failed to answer my questions on how much this process has cost. It’s still not clear and there are questions still to be answered.”

Milton Keynes South MP, Iain Stewart, said: “Passengers on the West Coast line will be seeing additional carriages and services on the line right away.

“During the Parliamentary statement, I asked the Secretary of State to make sure that, when the long-term franchise is let, the substantial improvements promised for the line over the next decade or so will be delivered.”

Virgin’s new contract will see the operator continue to run the rail line, which stretches from London to Scotland, until November 2014. It commences from December 9.

A new long-term franchise would then come into play. If a long-term solution is ready to commence prior to the expiration date the Virgin contract could be terminated early.

Under the new agreement, Virgin Trains will initially earn a fee equivalent to one per cent of revenue with the DoT taking the risk that revenue or costs differ from those currently expected.

Chief executive Tony Collins said: “I’m delighted that we have an agreement with the Department for Transport that gives us the chance to continue providing high quality services to our customers.

“We have had great support from staff and customers in recent months and we will repay that loyalty with even better service.

“We will not be sitting back in the coming months, but are keen to introduce more improvements to the service, which is already the most popular long-distance service in the country. We are proud of what we have achieved since 1997, but there is undoubtedly more to come and we will work closely with the Department for Transport to bring even better services in future.”

Pictured: Maria Eagle with Labour’s Milton Keynes South parliamentary candidate, Andrew Pakes