Updated 10.00 17 April

THE Department for Transport was reported to have had until 16.00 on 16 April to respond to the demand from Stagecoach Group for a ‘prompt, full and transparent response to help restore public confidence’ after three franchise bids from the Group were rejected on the grounds that they attempted to reduce pensions risk.

Both Stagecoach and its West Coast partner Virgin were reported to be considering legal action if the DfT does not change its mind.

The Department has ruled out Stagecoach bids for East Midlands, South Eastern and West Coast Partnership. When the DfT announced the decision on 10 April, it revealed that it had awarded the East Midlands contract to Abellio. This award is subject to the usual standstill period of ten days, although Stagecoach wants this to be extended until early May.

A committee of MPs has also now become involved. The Committee for Work and Pensions has written to the chief executive of TPR (the Pensions Regulator), Charles Counsell, asking to know how he proposes to deal with the shortfall in the railway pensions pot, which is said to be at least £5 billion and could as much as another £1 billion. The deficit has risen sharply, from £3 billion three years ago.

The letter, from the chair of the Committee Frank Field, says: ‘I understand TPR have been investigating these issues for some time, with rail firms now facing significant pension deficits. Might you please outline in a short note to the Committee,the extent of the deficit and TPR’s actions and future plans to work with firms and the Department for Transport to address this shortfall.’

The letter also said the rejection of all current bids from Stagecoach Group had sent a ‘clear message to the industry’, and that the railway pension deficit ‘surely requires an urgent solution’.

Stagecoach had said the risks in funding pensions involved in the bids demanded by the DfT were too great. It had proposed an alternative scheme which the DfT rejected as ‘non-compliant’.

Frank Field said: ‘While the staggering, parlous state of the railways pension scheme is anything but welcome, the one positive here is the clear signal from government to industry of further, heavy consequences for so badly mismanaging a pension scheme.

‘In the wake of Carillion it is encouraging to see government now taking public service provider pension schemes more seriously. Today we’ve written to TPR to see what they’ve done so far with this mess, and what the threat of further action by them can achieve to protect pensioners.’

The crisis has also angered the RMT, which has threatened widespread industrial action if its members’ rights are put at risk.