Revealed: How “Failing Grayling” derailed transport billionaires Richard Branson and Brian Souter

Ex transport secretary Chris Grayling Pic credit:BBC

Chris Grayling – who tomorrow is expected to become chair of Parliament’s intelligence and security committee – is a byword for wasting public money.

I have already written for Byline Times on his activities – and so extensive were his failings it took two long articles to add up the cost of Chris Grayling. You can read them here and here. He seems to have cost the nation some £2.7 billion – an extraordinary achievement for one individual – as well as causing misery for the probation and prison service and for millions of commuters.

Yet every human being can sometimes get things right. And last month Chris Grayling did so in a decision which involved risk.

A court judgement – virtually unreported except in the Financial Times – vindicated a very controversial decision he took as transport secretary way back in April last year on every count.

Grayling decided to disqualify three bidders from getting hold of three very lucrative rail franchises – the West Coast main line from London Euston to Glasgow and Edinburgh; the East Midlands franchise and the commuter lucrative South Eastern franchise from Kent into London.

Sir Richard Branson : A quote that came back to bite him

The bidders banned were Sir Richard Branson’s Virgin Trains (as part of the West Coast partnership with the French state owned SNCF) Sir Brian Souter’s Stagecoach and Arriva owned by German state railways Deutsche Bahn.

The reason why Grayling disqualified them is because all three did not want to take on a big share of the liability for paying out pensions to some 346,000 retired and active train drivers and staff while they were running the services. Instead they wanted to make as money as they could by dumping the pension cost onto the state – that’s you and me.

pension costs

Their move was despite a ruling by the Pension Regulator which said anybody running a privatised rail service should have to fund any pension shortfall and not taxpayers.

Their decision caused consternation in rail franchise industry since two of the contracts were subsequently let to new providers. The East Midland franchise was awarded to Abellio East Midlands Ltd and the West Coast Partnership franchise was later awarded to First Trenitalia West Coast Rail Ltd. The South Eastern competition was cancelled.

Expensive law case

A lengthy and extremely expensive trial followed with costs building up not only for the ministry but the three companies and the companies who subsequently won the contracts who had to keep an eye on the case. Deutsche Bahn’s owned Arriva decided to settle out of court.

So complicated is the judgement from Mr Justice Stuart Smith that it runs to 193 pages and the Courts and Tribunals Service issued a rare explanatory memorandum to help the public understand it.

If it had gone the other way it could have thrown the whole rail franchise system into further chaos – since it would have meant that the two private contractors would have won the franchises by an illegal competition and they would have to bid again.

But it didn’t. As the Department for Transport said; “We strongly welcome this decision, which finds our franchise process was fair, our conduct was transparent, and the disqualification at the heart of this case was proportionate.”

There is a sting in the tale. The Department of Transport want Sir Richard Branson and Sir Brian Souter to pay all its costs.

Sir Brian Souter was chairman of Stagecoach when Grayling took action. He is still a member of the board.

This is a blow to Sir Brian who condemned the ministry when it took the original decision as ” dysfunctional and deceitful”.

And it will be lesson for Sir Richard who once wrote: You don’t learn to walk by following rules. You learn by doing, and by falling over.

This time he has taken a real tumble, particularly after suing the NHS when he failed to win an £82 million contract and then blaming the NHS Commissioners. See the riposte here. The case was settled out of court and it is understood his company Virgin Care got £328,000.

This new judgement may explain something else. The Department for Transport is very wary about continuing the present franchise system. And because of Covid 19 it has virtually nationalised the railways. I suspect it won’t return to the old system as it won’t want any more nail biting court cases even though it won.

Labour is much clearer – they will simply nationalise the system permanently – a decision that its new leader Sir Keir Starmer has followed through from Jeremy Corbyn.

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