Friday analysis

THE rejection of three franchise bids from Stagecoach and another from Arriva over pension provisions has ignited new industrial tensions (writes Sim Harris), with the RMT now threatening national action over what it sees as a risk to the rights of staff.

Meanwhile, transport secretary Chris Grayling has come under fire from MPs over his decision to disallow what the Department for Transport is describing as ‘non-compliant’ bids.

The Railway Pensions Scheme has a funding gap of as much as £6 billion, and Mr Grayling wants operators to take responsibility for it – a stance which Stagecoach chief executive Martin Griffiths is describing as a ‘shock’.

There is no suggestion that Stagecoach has been permanently banned from franchise bidding, in spite of some reports which imply otherwise, but it has certainly lost the competitions for East Midlands, South Eastern and the West Coast Partnership. Indeed, the East Midlands franchise was awarded to Abellio, even as Stagecoach was being shown the door.

Its exclusion from West Coast has effectively banned Virgin as well, because Stagecoach, SNCF and Virgin had formed a partnership to bid for the West Coast Partnership, which is planned to run throughout the 2020s and is also set to include operating the first phase of HS2.

The RMT is concerned that the row is now putting railway pensions at risk, and has said national industrial action is on the cards.

The union’s general secretary Mick Cash warned: ‘No one should be under any illusions. The pension rights of RMT members are not there to be used as bargaining chips in a row between the train companies and the Government. Any threat to our members’ pensions will be met with ballots for action and we will co-ordinate any response across the country.

‘This situation is deadly serious and we are preparing to fight if need be and the Government and the train companies should wake up to that fact.

‘We are demanding immediate assurances that the pension rights of our members will not be threatened in any way.’

For transport secretary Chris Grayling, the dispute has provided another opportunity for his critics and prompted fresh calls for his resignation.

In the Commons on Thursday Labour’s Clive Betts, who represents Sheffield South East, had some urgent questions: 

‘How much, in total, are the Government trying to cover in costs through the franchising process? When were the bidders notified of the requirement—was it at the beginning of the process?—and why was no one else told about it? Are any other companies refusing to cover such costs? Are any other franchises affected? If they are, what will be the effect on competition within the franchising system?’ he asked.

Rail minister Andrew Jones responded: ‘Stagecoach has acknowledged to the Department that it had bid non-compliantly. We have received offers from other bidders in all competitions that are fully compliant in providing the required pension arrangements for railway workers so, to answer the hon. Gentleman’s question on whether this means the bid process is failing and others are refusing, clearly they are not because we have a compliant bid that won in good form.’

Labour’s shadow transport secretary Andy McDonald was not reassured, saying: ‘This Government, by sleight of hand, are trying to reduce their support for the railways pension scheme. They are trying to pass these costs on to the private sector. That is why both Stagecoach and Arriva defaulted on their bids for East Midlands. The rail industry has a plan to reduce the deficits, yet the Government have ignored that and are attempting to bulldoze through changes without consultation. That is reckless. It will concern rail workers and worsen the rail service for passengers. What discussions were there with the trade unions? Moreover, given that Keith Williams has been instructed to conduct a root-and-branch review, why has such a lengthy franchise been awarded before the Williams review reports later this year?​’

Mr McDonald also asked if the rejection of Stagecoach was ‘payback’ for the failure of Virgin Trains East Coast. Mr Jones told him that was ‘nonsense’, adding: ‘Do I think the franchising system is over? Absolutely not. I think we need to look at how it will evolve in future, and that is what the Williams review is doing.’

Alan Brown, who represents Kilmarnock and Loudoun for the SNP, was concerned about Mr Grayling’s position now. He said: ‘Many of us have called for the transport secretary to resign. Now we have the irony of the transport secretary threatening the Prime Minister to resign over her position on Europe. Will he follow through on his threat, or will the Government take action and make the secretary of state resign and shake up the Department?’

Again, Andrew Jones said that was ‘just complete nonsense’.

The rail minister was also keen to emphasise that the present divisions over pensions need not be permanent, telling MPs: ’Stagecoach has played an important role in our railways, and we hope it will continue to do so after the conclusion of the rail review. However, it is entirely for Stagecoach and its bidding partners to explain why it decided to ignore established rules by rejecting the commercial terms on offer.’

Stagecoach Group shares lost almost ten per cent on Thursday. On Friday morning at 08.20 they were down another 1.8p, to stand at 122.20.