Chris Grayling is expected to decide the fate of the beleaguered East Coast franchise in days

Alexandra Rogers
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Grayling's announcement is expected this week (Source: Getty)

The prospect of a state-run East Coast rail line is back on the cards with the government expected to announce the fate of the failed franchise within a matter of days.

The transport secretary, Chris Grayling, is expected to tell the House of Commons this week of his preferred option for the franchise, which could mean that the services continue on a not-for-profit basis under the current operators – Virgin and Stagecoach – or are temporarily nationalised by the government.

The Department for Transport (DfT) said: "An annoucement will be made in due course."

Grayling admitted in February that the franchise was "unsustainable" after a predicted growth in passenger numbers failed to materialise, leading to projected losses for Stagecoach of about £200m.

Stagecoach's chief executive Martin Griffiths said the franchise had suffered from the impact of a weak economy, political uncertainty and an ongoing unreliability of the track and signalling on the line, but said Stagecoach never asked for special treatment for the franchise.

Grayling has previously aired his opposition to nationalisation, writing in Conservative Home in January that when the state owned large parts of the economy throughout the 1970s and 1980s "we saw an endless stream of heavy losses and failure – and very poor customer service".

Read more: Grayling threatened with legal action over beleaguered East Coast franchis

However, there is significant public anger around the collapse of the Virgin Trains East Coast (VTEC) line, with one rail campaign group, Bring Back British Rail, launching a crowdfunding campaign to take the transport secretary to court over the issue.

One source said the government would have had to consider the nationalisation option because if it the decision was not made properly, it could leave the government vulnerable to to legal challenges.

In a blog post today the chief executive of the Rail Delivery Group Paul Plummer reiterated its support for the partnership model, saying: "In the long term, we must deliver on our plan through a public and private partnership to build a rail network that strengthens the railway’s contribution to the economy, keeps running costs in the black and frees up taxpayers’ money.

"The imminent decision for the East Coast franchise is short term," it continued. "The current system has functioned as expected to protect the taxpayer: the current operator has paid for the shortfall in predicted passenger revenue through the bond it provided to government. The bond has done its job. This would not have happened in a system without private sector involvement and the government would have had to fund any shortfall from taxes."

Meanwhile the shadow transport secretary, Andy McDonald, said the transport secretary "must not continue to reward their [the operators'] failure".

Last month Grayling faced calls to resign following a scathing commons committee report that said passengers were paying the price for the broken franchising system.

Chair of the public accounts committee Meg Hillier said: “This imbalance cannot continue. The franchising model is broken and passengers are paying the price.

“If taxpayers are to have any faith in Government’s ability to deliver an effective passenger rail network then it must conduct and act on a thorough review before any further franchises are awarded."

Read more: Grayling told to resign following scathing report on franchise model

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