Government sells East Coast ahead of election, despite record profits and high passenger satisfaction

In a short-sighted and purely ideological decision, the publicly owned East Coast main line has been sold off to InterCity Railways Limited, a joint venture of private train operators Stagecoach and Virgin. The sell off of the line in a rushed process – taking 16 months instead of the recommended 24, so that it has been sold before the general election in May 2015, exposes the shallow politics behind the decision.

Since being under public ownership in 2009, East Coast has returned over £1bn to the Treasury and won 35 industry awards. Profits are up on last year by £2.5m, and the Spring Passenger Focus Survey 2014 found that 91 per cent of respondents were satisfied or felt that the service was good. Passenger numbers also increased to 19m this year, a 4.5 per cent increase on last year.

Despite this record success, which stands in marked contrast to private operators in the UK rail network, the line has been sold. East Coast was taken back into public hands after private operators GNER and NXEC failed to deliver. Even so, GNER made £213.5m in profits and paid out £196.7m in shareholder dividends, after receiving a total of £342.6m in net subsidies between 1997 and 2007.

Action for Rail has run a long-standing campaign to keep East Coast in public hands, with supporters from trade unions, campaign and community groups taking part in a range of actions around the UK, lobbying MPs and more. Despite achieving a significant amount of political and media attention and public support, and a legal challenge launched, the government has bulldozed ahead.

When the franchise is privatised, taxpayers will be subsidising the profits of the new private operator, which, instead of being reinvested back into the network, will go into the pockets of shareholders. Recent figures from the Office for Rail Responsibility show that all but one of the private train operators would not make a profit without such subsidies. In 2012/13, Virgin Trains received £194m in taxpayer support, while paying out £40m in shareholder dividends, while East Coast returned £16m to the government.

Re-privatising the East Coast is clearly not in the best interests of taxpayers and passengers, and brings to light the ideological nature of the sale.

Action for Rail continues to campaign for a publicly owned, nationally integrated railway that puts people before profit.

Notes
For figures, please see ORR (2014) GB rail industry financial information 2012-13Passenger Focus (2014) National Rail Passenger Survey – NRPS – Spring 2014 – Main Report