Richard Branson hits back at "bailout" criticism of Virgin and Stagecoach's East Coast rail franchise

Rebecca Smith
Critics have said the government has bailed out the East Coast rail franchise
Critics have said the government has bailed out the East Coast rail franchise (Source: Virgin Trains East Coast)

Virgin founder Sir Richard Branson today hit back at criticism of the government's East Coast rail "bailout", saying he is not benefitting from it.

The government announced in November that it planned to set up a public-private East Coast Partnership, with the franchise for Virgin Trains East Coast - a partnership between Virgin and Stagecoach - ending in 2020.

The train operator had originally pledged to pay £3.3bn to run the service until 2023.

Read more: Stagecoach thrown off track by "onerous" East Coast contract

The chair of the National Infrastructure Commission resigned in December, criticising the East Coast arrangement it as a "totally unjustifiable" decision. When news of the Department for Transport's (DfT) decision emerged in November, Lord Adonis branded it a bailout, and said the DfT had "serious questions to answer about the fiasco".

Today, Branson has written a blog defending the decision, saying:

The critics argue that my partners at Stagecoach and I are somehow benefitting from this. The fact is we have both lost significant amounts of money – well over £100m in total – and have not received a penny in dividends.

The entrepreneur noted that the partnership did agree to pay £3.3bn to the government over the eight year franchise.

"However that bid was based on a number of key assumptions and a promise of a huge upgrade of the infrastructure by Network Rail that would have improved the reliability of the track and allowed us to run more trains and carry many more passengers than we do today," Branson said.

He added:

The considerable delays to this upgrade, to new trains, as well as poor track reliability will cost us significant lost revenue (amounting to hundreds of millions of pounds) and torpedoed the assumptions of our original bid.

As the facts became clear about these issues – (as well as a drop in Britain’s GDP growth) - a discussion with government had to take place and a pragmatic solution was needed to keep delivering improvements and investment in the line.

"The current system can certainly be improved, and we want to continue to work with the government and Network Rail to bring about improvements for the benefits of our passengers. I hope and believe the East Coast Partnership is a step in that direction," Branson said.

MPs said last month they planned to scrutinise the early termination of the franchise, with the Public Accounts Committee saying it was liaising with the Transport Select Committee on the matter.

Read more: MPs plan to scrutinise East Coast rail franchise as DfT denies bailout

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