Campaign launched to return East Coast rail to public ownership

A campaign to return the East Coast rail franchise to public ownership has been launched in protest against the government’s bailout of the Stagecoach-operated Virgin Trains service.

More than 10,000 have signed a petition demanding that the London-Edinburgh line be run by the public sector, following the deal announced last month by the transport secretary, Chris Grayling.

As part of a rail strategy published by Grayling, the franchise contract of Virgin Trains East Coast will be terminated three years early, potentially forfeiting up to £2bn in premiums due to the Treasury.

The franchise will be replaced by a new partnership, which could well involve Stagecoach, which indicated it would bid to run the line.

East Coast was operated in the public sector from 2009 until 2015, and rail campaigners are now renewing their focus on the intercity line.

Cat Hobbs, a director of the campaign group We Own It, said: “Chris Grayling has sent a clear message to the train companies: It doesn’t matter what you do. It doesn’t matter whether you succeed in running our railways. This government will bail you out, no matter what. Pocket the profits – the public will take the risk.

“Our message for Chris Grayling is: no way. Passengers and taxpayers will not pay for this bailout. Train companies have failed too many times. Send Virgin and Stagecoach packing for good – and make sure you collect what we’re owed before they go.”

Hobbs said surveys showed a clear majority of people think that the railways should be run in public ownership and that renationalisation would mean a less fragmented, more efficient and cheaper railway, saving at least £1bn across the network annually.

The campaign to renationalise East Coast was backed by the TUC, whose general secretary, Frances O’Grady, said: “Privatisation broke it. Public ownership fixed it. And now privatisation has broken it again. Ministers made the same mistake twice. The lesson of East Coast is that railways should be in public ownership. It would mean more reliable and better value rail travel for everyone.”

Andrew Adonis, the former transport secretary and now chairman of the National Infrastructure Commission, said the early termination of Stagecoach’s East Coast contract “looks set to be the worst transport scandal since the collapse of Railtrack in 2001”.

He said: “Taxpayers will have to pick up a bill for hundreds of millions because of the government’s extraordinary decision to bail out Stagecoach and Virgin on the East Coast. If they were going to default on the franchise then Chris Grayling should have refused to renegotiate their contract and set up a state company, as I did when National Express defaulted in 2009.

“It’s not just East Coast which is now in line for a bailout: every other loss-making franchise will expect the same handout from Chris Grayling and the cost could run into billions.”

Rail fares are due to rise by 3.4% in January, the highest increase in five years.

Grayling’s decision to allow Stagecoach to exit its franchise is expected to come under scrutiny from the Commons public accounts committee in the new year.

Virgin Trains East Coast was awarded an eight-year franchise in 2015, but like National Express and GNER before it, has faced financial difficulty after apparently overbidding to run the route. The Stagecoach-Virgin joint venture bid £3.3bn for the route but the bulk of that bill was due after 2020.

Stagecoach has said it will honour all its financial commitments, although it is also renegotiating terms with the Department for Transport for the remainder of its term to 2020. Forecast passenger growth has failed to materialise, while the delivery of upgraded infrastructure and new trains ordered by the government is likely to further dent their earnings.

Between 2009 and 2015 the East Coast mainline was run by Directly Operated Railways, a DfT-owned company.

The DfT said: “Our railway franchising system has brought in more than £3.5bn of private sector investment over the past four years – delivering more trains, more seats and quicker journeys right across the country to improve services for passengers.

“We have set out our plans to end the operational divide between track and train to cut delays and improve performance – and the East Coast partnership will be the first of a new generation of integrated regional rail operations. The Department for Transport will continue to receive premiums from the East Coast operator.”

Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here.