A Coalition that's been derailed

Thursday 4 October 2012

IF you were looking for an indication that a government department is not functioning competently, a hurried press release issued after midnight to beat the opening of the stock markets, announcing a humiliating blunder, is as strong a sign as you could wish for.

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The confession by Transport Minister Patrick McLoughlin that the tender process for the West Coast Main Line rail franchise was flawed and he was scrapping the whole process was bad enough. The manner in which it emerged merely adds to the sense of chaos engulfing the Department for Transport (DfT).

The decision to suspend three members of staff, admit culpability, and restart the whole competition at a cost to taxpayers of up to £50m has implications that stretch far beyond the Glasgow to London railway line.Plans to hand over the franchise from Virgin Trains to First Group on December 9 will not now go ahead, Mr McLoughlin says, because of "deeply regrettable and completely unacceptable mistakes made by my department". He has announced two independent reviews – one into the West Coast franchise competition and another into the wider DfT rail franchise programme.Both are welcome. The first must not just establish where the process was flawed. It is already relatively clear that the financial risk involved in the rival bids from Virgin and First Group was not properly calculated at the DfT, in a way that made the awarding of the contract to First for £5.5bn indefensible.But this is not the only issue. Not only did ministers and civil servants oversee a fatally flawed procedure, they continued to defend it bullishly when asked to rethink, first by Virgin Trains, and subsequently by the transport select committee and a public petition which attracted 150,000 signatures. Indeed it was only when Virgin insisted on a judicial review that the DfT appears to have looked closely enough to spot its mistakes, resulting in that panicky late-night climbdown. So the first review must be full and transparent. It should explore why the DfT is so dysfunctional – there is a suspicion that a high ministerial turnover and understaffing have contributed to its problems. This was the first major test of the Coalition Government's new approach of giving private companies more freedom in how they approach such bids and it has been a fiasco.The review must also explain why taxpayers will face a bill for the costs of the four bidders who took part in the flawed competition, and could have been exposed to potentially much greater costs if the contract had been awarded and subsequently collapsed.For this is not the first time these processes have gone badly wrong. In 2009 taxpayers were left to pick up the tab when National Express surrendered the East Coast Intercity passenger franchise, unable to deliver the bid it had made. Directly Operated Railways now runs that franchise on behalf of the Government. It had already been mobilised by the DfT to manage the West Coast line in the event that legal challenges prevented First Group from taking over in December. Ministers must act urgently to get a grip on the situation and produce a franchise tender model that is fair, transparent and protects the taxpayer. The paradox for a Tory-led coalition is that a renationalised East Coast Line is performing well for the taxpayer and rail passengers. This is another source of embarrassment for the Prime Minister, whose party began the benighted rail privatisation programme under John Major.

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Local government

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A Coalition that's been derailed

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