Transport minister Patrick McLoughlin said “there will be no sop to any organisation” while his department’s errors are probed and the bidding process is run again. But he told parliament that Virgin, as the current operator, is best placed to serve passengers for the next nine to 13 months.
The decision also avoids temporary renationalisation. McLoughlin added that “I don’t think there’s any reason to contemplate” the prospect of state-controlled Directly Operated Railways taking over the three other routes whose franchises are also on hold.
The commercial terms of the deal with Virgin are still being negotiated. The operator said before the competition was cancelled that it would run the route for free beyond the franchise’s expiry date of 9 December, but this is now believed to be unlikely.
McLoughlin could not tell MPs how much the franchising debacle is likely to cost, on top of the £40m refund already promised to the four firms who entered bids for the West Coast route.
He acknowledged that staffing cuts have been made in his department, but made “no apologies whatsoever” given the economic circumstances.
McLoughlin said there would be no change to the High Speed 2 proposals as a result. “The HS2 business case has undergone extensive quality assurance and we are confident they are accurate.”
FirstGroup, which won the botched West Coast franchise competition in August but has been left in limbo by the ongoing investigations, gave a cautious welcome to Virgin’s extension yesterday.
“We believe the private sector provides the most effective and efficient way to deliver passenger rail services in the UK,” said a spokesperson.
But lawyers said the decision sits awkwardly with current rules on procurement competition. “The problem is that there is no easy way out of the hole and this morning’s announcement poses as many problems as it solves,” said Patrick Twist, an infrastructure specialist at Pinsent Masons.