ECML franchise fails .... again....

[jjb1970]

Since when have Virgin run the Est Coast franchise?

I always thought it was 90% Stagecoach and 10% Virgin so Stagecoach could use the Virgin branding, Virgin have the square root of naff all to do with the actual operation of the franchise!

I did say Virgin Trains, I'm fully aware of the ownership split behind the Virgin West and East Coast brands. I am sure everyone else on RMweb is too but the brand is nevertheless Virgin therefore it is reasonable to use that name.

[JDW]

They might only hold 10%, and most on here are probably aware that Stagecoach is the majority partner, but to most non-enthusiasts, it is a Virgin train, they are the face of the franchise and it's what people will know it as.  Virgin are very brand aware, it won't be by coincidence that they are the minority partner but the well known name, and as much as they have less to do with it than Stagecoach, I imagine they have plenty to say about what goes off under their name!

[pete_mcfarlane]

It's an interesting situation, as Virgin are the ones who take the reputation hit from the public if things go pear shaped despite only have a small stake in the business. 

[royaloak]

They might only hold 10%, and most on here are probably aware that Stagecoach is the majority partner, but to most non-enthusiasts, it is a Virgin train, they are the face of the franchise and it's what people will know it as.  Virgin are very brand aware, it won't be by coincidence that they are the minority partner but the well known name, and as much as they have less to do with it than Stagecoach, I imagine they have plenty to say about what goes off under their name!

Nope, Virgin dont have anything to do with the running of the franchise, just as they have nothing to do with Virgin Media which is a Liberty Global Company.

[royaloak]

It's an interesting situation, as Virgin are the ones who take the reputation hit from the public if things go pear shaped despite only have a small stake in the business. 

Virgin only have a stake because they are using the name.

[jjb1970]

In terms of the ECML franchise ending early, I'd expect both parties to a contract to be held to the terms of that contract. Lord Adonis seems to be quite vocal on the subject of Virgin Trains and their obligations, he doesn't seem to be saying anything about the obligations running in the other direction. Why not have a fully transparent process which considers the delivery and responsibilities of all parties rather than just political grandstanding? Maybe some aren't interested in that as it would show a much more nuanced picture and perhaps indicate that Virgin Trains have quite a strong case here?

[phil-b259]

But then the DaFT claw the money back from EC and GWR etc so in a roundabout way it is the franchise (and by default) the passengers who are going to have to pay for these things for the next 27.5 years

 

So taxpayers are paying over the odds because of HM Governments incompetence then.

 

When you actually stand back and look at ALL the relationships involved, once again we see who the real villains are in all this - and its not the private sector as too many like to believe.

 

Hardly unusual I'm afraid to say - and it won't be the last instance while the Civil Service / ministers try to micromanage things it knows nothing about - be that Hospitals, Warships or Railways!

 

Its why I am a firm advocating of adopting the German or French health service model for our Health service- it keeps interfering Governments out of the picture. Democratic countability is all very well - but NOT if persons responsible for said 'accountability' keep messing things up by short term, ideological tinkering that causes the taxpayer to be charged over the odds for the privilege.

Edited December 30, 2017 by phil-b259

[rockershovel]

I'm not sure how that would work out in practice, as the way forward with Brexit has always been dependent on negotiations with the EU. The current uncertainty is down to nobody knowing what the outcome of these talks will be, as it's dependent on various trade offs between the two sides. It does feel like there are attempts by various politicians to present their favoured side as being saintly and reasonable, with all the problems caused by the intransigence of the other party, which is clearly ridiculous. 

 

Either Adonis is grandstanding, or he had very little to do with any negotiations during his time at the DfT (or anywhere else) and so doesn't understand how they work.

 

Well, this is the problem, isn’t it? The only sensible way to go about the whole EU business, would have been to convene a Royal Commission, get a proper review of the situation and likely outcome, offer THAT to the electorate and vote; OR take the position that the vote was NOT binding (which is constitutionally correct), convene a Royal Commission to report on the likely outcomes, have a proper debate in Parliament on that report, and THEN a free vote in Parliament on whether or not, to invoke Article 50. That would have allowed Parliament to say “we will/ will not leave, BECAUSE...” and at THAT point, a General Election could have been held (if required) on a clearly defined issue.

 

We didn’t join for no reason, and we didn’t spend our time in complete idleness once in. I don’t have any difficulty envisaging a Royal Commission, or any other body unconstrained by party political considerations, reporting that the economic argument for remaining was compelling. There is also the not-so-small matter that the EU clearly recognised that immigration from the A8 Accession States was a difficult issue, and made specific provision for managing that issue, which the then-Labour government proceeded to completely disregard, as did the Cameron administration (which did the same thing with respect to Bulgaria and Romania).

 

The risk, from the point of view of both parties, is that the outcome would be the testing to destruction of the whole two-party structure, because BOTH sides are irremediably divided, and BOTH have their fingerprints all over the causes.

[dibber25]

And there I was thinking this was about the ECML franchise. I assume 'Brexit' is a new TOC that I hadn't heard of, because surely we wouldn't be banging political drums on this forum? (CJL)

[pete_mcfarlane]

In terms of the ECML franchise ending early, I'd expect both parties to a contract to be held to the terms of that contract. Lord Adonis seems to be quite vocal on the subject of Virgin Trains and their obligations, he doesn't seem to be saying anything about the obligations running in the other direction.

Maybe he's keeping quiet and hoping that nobody in the media is bright enough to do any research in to Network Rail's current issues with infrastructure upgrades. They might find out who, as Transport Secretary, approved the GWML electrification that's gone so badly over budget and scuppered a lot of NR's other plans......

[The Stationmaster]

It's an interesting situation, as Virgin are the ones who take the reputation hit from the public if things go pear shaped despite only have a small stake in the business. 

 

Ah, but don't forget they also get paid for the use of their brand name - irrespective of the performance the franchise delivers. (and also reputedly to an offshore account so it has been reported on a couple of occasions in the past).

  

Incidentally the subject of the franchise has just been covered on R4 - complete with an excellent interview with Roger Ford who panned the idea of a joint trains and infrastructure thing absolutely brilliantly pointing out that VTEC only runs about 20% of the trains using the route (thank goodness they had the sense to talk to him and not their usual stooge who happened to leave a village without its idiot when he departed for bigger things).

[jjb1970]

Maybe he's keeping quiet and hoping that nobody in the media is bright enough to do any research in to Network Rail's current issues with infrastructure upgrades. They might find out who, as Transport Secretary, approved the GWML electrification that's gone so badly over budget and scuppered a lot of NR's other plans......

 

He's probably got a good chance of keeping himself off that particular hook, unfortunately. He is pushing on an open door for a lot of the population and media.

[Ken.W]

Virgin Group’s various airlines have a record of diluting ownership to provide fleet investment. Stagecoach aren’t a lot of people’s favourite operation, but they ARE a major fleet buyer of buses, and I dare say they take the same view of railway operation. If the new trains DO appear, all to the good; but I get a distinct impression that they will end up costing the taxpayer a lot of money, somewhere along the line.

 

The Virgin cabin crew uniform was/is an advertising stunt. BA had, at the time, a uniform I once heard described as “Nan, going to a wedding” and this isn’t good advertising. They were also playing silly games with tailfin designs, and Virgin upstaged them with a Union Jack on the tail and a conventional, tailored cabin crew uniform.

Well, your question was 'where are the new trains that they (virgin) have made all the fuss about?'

The ECML sets were always scheduled for late 2018 introduction, so where they are's somewhere down the production plan, where they were always meant to be at this stage, so it's incorrect to suggest they're not being delivered

As for if they do appear, they've been ordered by DaFT, who also specified use of them as part of the franchise specification, and I believe underwrite the financing of them, so there's no doubting that they definately will appear - although whether that's to the good's debatable given discussion elsewhere on here concerning their performance (lack of)

 

edit (it's the EC uniform I was thinking of)

Edited December 31, 2017 by Ken.W

[rockershovel]

So, if I understand all this correctly....

 

New trains are coming, paid for by the taxpayer, with no influence over where they are built. Large sums of taxpayer’s money, over and above the actual cost, are being channelled into an offshore account, somewhere in the Virgin Group, for this ...

 

There is a conflict of interest between DfT and the franchisees, not helped by the inability of DfT to keep to their contracted obligations over time, and the franchisee is amply provided with those whose role is it, to maximise the cost of this to the taxpayer..

 

Since the franchisee has de-facto control of the actual assets, there is a repeated tendency on the part of the franchisee to simply abandon their obligations if they deem it best..

 

 

You’re not really selling this, y’know...

[rockershovel]

I must admit that I’d missed the whole “uniforms” issue, but it seems http://railtube.info/2017/09/picture-paw-fect-all-change-as-jake-the-trainspotting-dog-models-new-virgin-trains-uniform-virgin-trains/ that Virgin have scrapped their recently introduced blue uniforms for red ones, amid a floridly-worded press release which appears to have been written by the Guardian - box ticking, much?

 

I’d always assumed that Virgin group uniforms would be red for female staff, blue with red piping for male staff, as a matter of course?

 

I don’t know what function the dog performs....

Edited December 31, 2017 by rockershovel

[The Stationmaster]

So, if I understand all this correctly....

 

New trains are coming, paid for by the taxpayer, with no influence over where they are built. Large sums of taxpayer’s money, over and above the actual cost, are being channelled into an offshore account, somewhere in the Virgin Group, for this ...

 

There is a conflict of interest between DfT and the franchisees, not helped by the inability of DfT to keep to their contracted obligations over time, and the franchisee is amply provided with those whose role is it, to maximise the cost of this to the taxpayer..

 

Since the franchisee has de-facto control of the actual assets, there is a repeated tendency on the part of the franchisee to simply abandon their obligations if they deem it best..

 

 

You’re not really selling this, y’know...

 

Er no.  

Firstly the trains are effectively being paid for by one of those nasty (according to some politicos) PFI deals although there is no doubt a lot of our money sunk into the overall DafT project.  

Secondly the ECML franchise/management contract/whatever operator has no choice but to lease the trains and that will cost them a lot more than current lease charges for Class 91/Mk4 and HST fleets, that is completely irrelevant in respect of whatever money might or might not go to Virgin as far as teh East Coast franchise/management contract etc is concerned.  

Third - as already pointed out - there is as yet nothing to suggest that the contracted delivery dates for ECML Class 800s will not be met and no apparent reason to think that situation will change.

 

What has happened (or rather not happened) is that NR have thus far failed to deliver all the route upgrades and that allegedly impacts on the passenger growth numbers projected by Stagecoach/Virgin when they bid for the franchise.  Getting at the truth of that could be quite illuminating, in more ways than one, because while it ought to be relatively simple to identify what promised work (down to current date) NR hasn't done assessing the impact of that on revenue would be much more difficult and that then leaves subject to considerable discussion various other reasons for revenue not coming up to the levels projected in the bid.  All I will say on that is apart from, I think, GNER's original bid all subsequent successful bids for the ECML franchise have seriously over estimated revenue and the franchise has failed.  To me that tends to say far more about the over-optimism of the bidders and the poor assessment of bids by DafT than it does about NR failing to complete various unstated bits of infrastructure work or for anyone to indicate the expected timetabling improvement effects of that work.

[Supaned]

Indeed , it begs the question of exactly how they think they can increase revenue to the extent that they claim in their over-inflated tender documents - surely this should be in the public domain so that everyone can see the calculations.

[rockershovel]

Er no.  

Firstly the trains are effectively being paid for by one of those nasty (according to some politicos) PFI deals although there is no doubt a lot of our money sunk into the overall DafT project.  

Secondly the ECML franchise/management contract/whatever operator has no choice but to lease the trains and that will cost them a lot more than current lease charges for Class 91/Mk4 and HST fleets, that is completely irrelevant in respect of whatever money might or might not go to Virgin as far as teh East Coast franchise/management contract etc is concerned.  

Third - as already pointed out - there is as yet nothing to suggest that the contracted delivery dates for ECML Class 800s will not be met and no apparent reason to think that situation will change.

 

What has happened (or rather not happened) is that NR have thus far failed to deliver all the route upgrades and that allegedly impacts on the passenger growth numbers projected by Stagecoach/Virgin when they bid for the franchise.  Getting at the truth of that could be quite illuminating, in more ways than one, because while it ought to be relatively simple to identify what promised work (down to current date) NR hasn't done assessing the impact of that on revenue would be much more difficult and that then leaves subject to considerable discussion various other reasons for revenue not coming up to the levels projected in the bid.  All I will say on that is apart from, I think, GNER's original bid all subsequent successful bids for the ECML franchise have seriously over estimated revenue and the franchise has failed.  To me that tends to say far more about the over-optimism of the bidders and the poor assessment of bids by DafT than it does about NR failing to complete various unstated bits of infrastructure work or for anyone to indicate the expected timetabling improvement effects of that work.

That seems to me, to be relevant, but not really the answer.

 

I’m particularly interested in the comment about successive franchises over-valuing projected revenues, although I’m not sure that I share your interpretation of “over-optimism”.

 

There’s a school of thought regarding contract bids, that believes in offering a potentially loss-making price in the expectation that the client, or some other third party will precipitate a situation in which the contractor or franchisee is unable to carry out their required operations, for reasons beyond their control. The ACTUAL anticipated return, is from over-payments or alternative payments arising from that situation.

 

Repeated over-valuation by successive franchise bidders, sounds very much like this sort of thinking in action.

 

Consider the wider situation. NR have a wide-ranging brief of maintenance and renewals, on a very complex network, some parts of which are very old and/or heavily used. The likelihood of some part of that delaying some other, unspecified, element must be close to 100% - and it’s usually possible to make informed assessments of where those problems are likely to arise. NR, in turn, probsbly has an internal culture which prevents it making that sort of assessment, particularly to its political masters. Those political masters, in turn, have a strong incentive not to allow things to go belly-up within the quite short period of their tenure.

 

The incentive to an incoming franchisee, to rely upon gaming the system in that fashion, must be very high..

[62613]

This is true BUT money doesn't grow on trees - every £1 HM Treasury spends either has to be raised from us through our taxes or it has to be borrowed in the money markets thus increasing the national debt. If you increase tax rates too much overall then economic activity WILL FALL and hit said tax receipts thus wiping out the gains made from the higher rates. On the other hand national debt doesn't magically disappear just because it is owed to the UK Government - interest payments are still required (just as they are when private companies borrowing money) and in extreme cases (such as Greece, Ireland or Portugal) it can cause serious problems in recessions where ironically Governments actually need to increase borrowing.

 

Shifting the burden of providing new trains out of Government hands removes the immediate need for HM treasury to stump up a large wedge of cash upfront either requiring more borrowing or diverting taxes away from other things. If done properly (i.e. NOT the way the DfT have been behaving over the past decade) it should also indemnify the risks to the Government of things going wrong during procurement.

Sorry Phil, the first paragraph is NOT true; as we have a sovereign currency, not tied to the value of any precious metals (a fiat currency) the treasury can, if it wishes, create money out of fresh air; in effect this is what happens when banks create a loan. The coalition government of 2010-15 did this with the £435 billion of quantitative easing, which they gave to the banks in the vain hope that they would use it to give out loans; instead it fuelled an asset bubble.

 

Interest rates on government borrowing have never been worse than 2% I believe, at any time since the crash; a pretty positive indication on the state of our economy.

[Ron Ron Ron]

So, if I understand all this correctly....

 

New trains are coming, paid for by the taxpayer......

 

No. They are being paid for by the banks who are financing them.

Nobody has actually bought these trains.

 

Hitachi are building the trains and are being paid for them by Agility Trains (of which Hitachi is the major shareholder).

Agility are borrowing the money from the banks to be able to do this.

Agility will raise the money to pay back their loans by renting out the trains (leasing) to the respective TOC's who operate the GW and ICEC franchises.

The TOC's will pay the leasing costs from their revenue.

 

If the franchises are running profitably, then there is no cost to the government** (and thereby, taxpayer), other than the hypothetical case that there might be higher premiums paid to the exchequer, if cheaper trains had been ordered.

On the other hand, as the premium payments are set out at the commencement of the franchise, it's arguable that cheaper trains would have mean higher profits for the TOC's instead. 

 

If the franchise runs at a loss and the eventual outcome is a public subsidy (would equally apply to a state owned operator), then there might be an argument that says there's "effectively" an element of the taxpayer paying for the trains.

That's not a watertight argument though, because the leasing costs are only one part of the cost of running the franchise.

It's largely irrelevant though, because the same would apply to any and all trains being leased by a subsidised TOC.

 

[**  The cost to the taxpayer has been for the very expensive procurement process, made more than twice as expensive by the subsequent circus of ministerial, departmental and revue body interventions.]

 

 

....with no influence over where they are built.

The taxpayers, through their elected representatives and respective government apparatus, did have an influence in where the trains would be built.

Most of them, apart from the small number of pre-series trains, are being built in the UK (Newton Aycliffe), from parts and components made in the UK, other countries in the EU and Japan.

(Some of the non-IEP versions are being built in Italy, but that has nothing to do with the IEP)

 

The alternative bid (Bombardier/Siemens), would have seen the trains built either in the UK, or in Germany, from parts made in mostly EU countries, including the UK.

(note that Bombardier have sourced some components from China for other trains they build in the UK)

 

 

Large sums of taxpayer’s money, over and above the actual cost, are being channelled into an offshore account, somewhere in the Virgin Group, for this ...

Nothing to do with the trains. The franchise issues are quite another thing.

 

 

.

Edited December 31, 2017 by Ron Ron Ron

[D854_Tiger]

I’d always assumed that Virgin group uniforms would be red for female staff, blue with red piping for male staff, as a matter of course?

 

 

                      .... and show plenty of leg.

 

Oh did I say that.

[phil-b259]

 

 

Interest rates on government borrowing have never been worse than 2% I believe, at any time since the crash; a pretty positive indication on the state of our economy.

 

I disagree - the UKs borrowing rate is not so much driven by the state of the economy, but rather the perceived competence of the Government and the UK Treasury. Its worth noting that throughout the severe recession post 2008, the UKs credit rating (and thus the interest rates charged to HM Government by lenders hardly changed from the pre crash years record lows. Why? because the money markets had confidence in the long term ability of the UK Government to maintain a stable course - unlike states like Spain / Portugal / Ireland, etc

 

By contrast, since the country elected to go it alone outside the EU, there has been a progressive downgrading of UK credit ratings - which increases the interest rates on borrowing over time. This change is directly due to the perceived damage our leaving the EU will cause to our long term prosperity - in other words our Government no longer looks as bullet prof financially as it once was - despite the economy in general having not really changed that much in the 18 months since the vote.

Edited December 31, 2017 by phil-b259

[D854_Tiger]

I disagree - the UKs borrowing rate is not so much driven by the state of the economy, but rather the perceived compliance of the Government and the UK Treasury. Its worth noting that throughout the severe recession post 2008, the UKs credit rating (and thus the interest rates charged to HM Government by lenders hardly changed from the pre crash years record lows. Why? because the money markets had confidence in the long term ability of the UK Government to maintain a stable course - unlike states like Spain / Portugal / Ireland, etc

 

By contrast, since the country elected to go it alone outside the EU, there has been a progressive downgrading of UK credit ratings - which increases the interest rates on borrowing over time. This change is directly due to the perceived damage our leaving the EU will cause to our long term prosperity - in other words our Government no longer looks as bullet prof financially as it once was - despite the economy in general having not really changed that much in the 18 months since the vote.

 

Another important factor in the setting of those interest rates is a government's ability to reign in spending.

 

By all accounts, when a hung parliament resulted from the 2010 GE, the treasury in no uncertain terms relayed to the major parties, "You b*****s need to get your act sorted, and now, because the bond markets will lose patience and won't reward you for it if you don't."

 

UK borrowing by then had risen by as much as the markets could bare and, in the end, one very good reason why the LDs and the Tories were able to come together and make the compromises that allowed that coalition to stick.

[rockershovel]

Re #320, surely someone, somewhere, owns these trains?

 

Taking the specific case under discussion, that the Franchisees are being allowed to walk away, or bailed out, as the case may be, someone, somewhere must be bearing the cost. I don’t imagine Hitachi have built them for their own amusement.

 

There seems to be a good deal of press coverage, to the effect that the taxpayer has not been well served in the matter - is this so?

[jamie92208]

Re #320, surely someone, somewhere, owns these trains?

 

Taking the specific case under discussion, that the Franchisees are being allowed to walk away, or bailed out, as the case may be, someone, somewhere must be bearing the cost. I don’t imagine Hitachi have built them for their own amusement.

 

There seems to be a good deal of press coverage, to the effect that the taxpayer has not been well served in the matter - is this so?

The trains belong to Agility Trains who have borrowed large sums from a consortium of banks on the basis that the lease charges will cover the cost of servicing the loans, thus they belong to the banks until what is in effect the mortgage is paid off. After that Agility will own them. Because Hitachi owns most of Agility they will in fact own the trains that they have built in due course. I suspect that the Government have had to provide guarantees that the mortgage will continue to be paid whatever happens to the Franchisees. The terms of the lease have been discussed at length though the exact terms are not fully in the public domain due to the DaFT quoting commercial confidentiality. Well informed commentators such as Roger Ford have however speculated that the new trains are going to cost about twice as much per vehicle per month to lease than the existing stock.

 

On most US locos you see a little plate that says which trust company the loco has been financed by and when there is a recession the particular conditions of the trust/lease are usually one of the main reasons for choosing which locos to out into storage.

 

Jamie