Exclusive: Government to 'renationalise' East Coast rail after string of failures

Steven Swinford
Chris Grayling, the Transport Secretary - PA

 The Government will renationalise one of Britain's busiest railway lines after its private operators admitted they could not afford to keep running it.

Chris Grayling, the Transport Secretary, will pull the plug on the East Coast rail franchise after a string of failures by Stagecoach and Virgin.

The decision to temporarily bring the line back into public ownership is politically embarrassing for the Government, which has repeatedly defended the private franchise model for the railways.

It comes amid concern from Tory MPs that Jeremy Corbyn’s call to renationalise the railways is cutting through to the electorate.

It will be the third time in under a decade that ministers have had to intervene on the line.

Jeremy Corbyn, the Labour leader Credit: Robert Perry/Getty Images Europe 

Stagecoach and Virgin have run the franchise on a 90:10 split since 2015 and had already announced they would be handing it back to the Government three years early.

They had originally signed on to run the line until 2023. Critics believe the collapse of the franchise will cost taxpayers hundreds of millions of pounds, something the Government has fiercely disputed.

Last year it emerged that the franchise was to be scrapped three years early after Stagecoach and Virgin admitted they had overestimated passenger numbers and suffered a revenue shortfall.

The East Coast Line | A history of broken franchises

Mr Grayling said in February that the financial outlook for Stagecoach had rapidly deteriorated in recent months, with the company incurring losses of almost £200m.

The Government had two options relating to the future of the East Coast mainline: nationalising the line temporarily or renegotiating a not-for-profit management deal with the two operators.

The Government had indicated it remained open to the possibility of allowing Stagecoach to keep the franchise until 2020 on a not-for-profit basis.

But ministers have ditched that option and opted instead to take “direct” control of the line.

The renationalisation of the line is expected to last for the next two years.

After 2020 the expectation is for the East Coast mainline to be operated on a new “public-private partnership model”.