Major infrastructure projects designed to boost the economy in the West could suffer as a result of the rail franchise fiasco.
Three senior civil servants were suspended last night after the franchise for the West Coast Main Line descended into chaos, casting doubt on the process by which rail contracts are awarded.
The Government was forced into an embarrassing U-turn over the award of a the contract to FirstGroup, costing taxpayers £40 million in compensation. Laying the blame “wholly and squarely” on the Department for Transport (DfT), new Transport Secretary Patrick McLoughlin said he was cancelling the competition for the London-to-Scotland line.
He also suspended three other franchise processes – including that for the Great Western Main Line, the contract for which includes the running of the Bristol Metro and a reopened line to Portishead.
Delays to the rail system are likely to have a knock-on effect on other investment in the region, also delaying the £200 million in grants announced by the Government for the Bristol Metro.
Transport analyst Douglas McNeill, from Charles Stanley, said that the enquiry process could lead to delays of up to a year in the awarding of the franchise.
“I don’t think it would be a surprise if the deadline for the enquiries slipped and, even if it doesn’t, I think the Government would want to take its time to study its conclusions,” he said.
First is competing against Arriva, National Express and Stagecoach for the multi-billion-pound contract.
Yesterday’s announcement came after civil servants at the DfT uncovered flaws in the process they were preparing to defend against a legal challenge by Virgin Rail.
In August, with Justine Greening in charge at the DfT, the department announced that a new 13-year, four-month franchise for the West Coast had been awarded to FirstGroup.
Describing theprocess as “flawed” and “insane”, Sir Richard Brainson, chairman of Virgin, launched a legal challenge but Ms Greening and, later, Mr McLoughlin said the bidding had been carried out correctly.
Yesterday, Mr McLoughlin pulled the plug on the process, saying “unacceptable mistakes” had been made by the DfT in the way it managed bids from FirstGroup, Virgin and two other companies.
The civil servants suspended were among those who had been involved in the West Coast franchise competition, the DfT said.
Mr McLoughlin said he was “very angry”, was dropping opposition to the Virgin court proceedings and ordering two independent inquiries.
While Mr McLoughlin toured broadcast studios explaining the situation, Labour and transport unions took the opportunity to pour scorn on the Government.
Labour leader Ed Miliband dubbed the West Coast process “a fiasco and another Government screw-up” while rail union TSSA spoke of passengers paying “sky-high prices for this long-running farce”.
Mr McLoughlin said: “The original model didn’t take into account inflation and also some elements of the passenger number increases. I want to make it absolutely clear that neither FirstGroup nor Virgin did anything wrong. The fault of this lies wholly and squarely with the DfT.”
In 15 years, Virgin has more than doubled annual passenger levels and introduced high-speed tilting Pendolino trains on West Coast.
Sir Richard, who had questioned FirstGroup’s ability to live up to its franchise promises for the whole length of the proposed contract, welcomed Mr McLoughlin’s decision and said he was hopeful that Virgin would carry on running the franchise. FirstGroup said it was “extremely disappointed” at the news, adding that it had submitted “a strong bid, in good faith and in strict accordance with the DfT’s terms”.
Bob Crow, general secretary of the RMT transport union, said: “The whole sorry and expensive shambles of rail privatisation has been dragged into the spotlight this morning.”