The East Coast rail service will be temporarily renationalised, the government has decided, after operators Virgin and Stagecoach could no longer meet the promised payments in the £3.3bn contract.
The London to Edinburgh service will be taken back into public control on 24 June, a little over three years since Virgin Trains East Coast (Vtec) started running. It will be rebranded as the London and North Eastern Railway.
The transport secretary, Chris Grayling, told the House of Commons that after a “finely balanced” assessment by civil servants, he had decided to appoint the “operator of last resort” – a group led by the firm Arup and under government control – to run the service, rather than allow Stagecoach and Virgin to continue under fresh terms.
Grayling said: “The route continues to generate substantial returns for the government. It is not a failing railway … However, Virgin and Stagecoach got their bids wrong.”
He insisted taxpayers had not lost out, adding: “Only Vtec and its parent companies have made losses at this time … We cannot expect companies to take on unlimited liabilities otherwise they would not bid for franchises.”
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