Government terminates Virgin Trains East Coast franchise

Media playback is unsupported on your device                  Media caption Chris Grayling says talk of nationalising the whole rail network was

It is the third time since 2007 that the 393-mile flagship route between the English and Scottish capitals has been returned to government hands after contracts failed, giving ammunition to the opposition Labour party which opposes privatization.

The Department for Transport has today announced that London North Eastern Railway will be taking over train services from Virgin Trains East Coast.

Mr Grayling told parliament that Stagecoach and Virgin have lost nearly £200m, but that this had not been a loss to taxpayers "at this time".

"It is now essential both Virgin and Stagecoach are barred from bidding for any future franchises - but the SNP's silence on this issue has been deafening".

Transport secretary Chris Grayling took the decision after the public accounts committee found last month that forecasts for passenger growth from the franchisees were "wildly wrong" and proved that rail franchising was a "broken model".

However, Stagecoach and VTEC which have run the line since 2015, will not be in the running for the new contract.

A train travelling on the East Coast mainline is reflected in the River Tweed as it crosses the Royal Border Bridge at dusk, in Berwick-Upon-Tweed in Northumberland, Britain August 22, 2013.

If a franchise is terminated or there are no acceptable private bids, the Secretary of State for Transport can take over the franchise as an operator of last resort.

"Deputy leader of City of York Council Andrew Waller said he would be writing to Mr Grayling immediately:to seek assurances and guarantees of stability for residents, commuters and workers in York".

The service's most successful period had come under public ownership, Mr McDonald said, until it was "cynically reprivatised".

"My key issue around this, because it is a United Kingdom government franchise, as opposed the Scottish taxpayers affected, is that there is no diminution in that service, but I am in some respects agnostic to which of the options we go down".

Lord Adonis, who resigned as the chairman of the National Infrastructure Commission in protest at what he called the bailout of the train firms at taxpayers' expense, said Wednesday's decision was "vindication" of his criticisms, and that Grayling had now done the right thing.

Stagecoach said it was "surprised and disappointed" that the government had decided not to proceed with proposals it had previously put forward to continue the franchise. He said in the last three years, Vtec had "attracted more passengers, greatly increased investment, achieved industry-leading customer satisfaction and made significant payments to the taxpayer to reinvest in public services".

Faced with such a situation, the department for transport considered two options: to let Stagecoach continue to operate the line on a not for profit basis; or appoint the operator of last resort - in other words, renationalise the line.

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