SCOTTISH Government may not strip outsourcing firm Serco of the £800m franchise to operate overnight rail passenger services between Scotland and London - two months after indicating it would be nationalised.
Transport minister Jenny Gilruth has confirmed that it is making an assessment over a direct award of the Caledonian Sleeper service to Serco - two months after saying that it would be stripped of the contract seven years early.
The current 15-year franchise was awarded to the outsourcing company Serco in May 2014, with the 15-year contract coming into effect on March, 2015.
The SNP said in October that the ending of the franchise in 2023 "presents an opportunity for the Scottish Government to consider bringing the Caledonian Sleeper into public hands, just like it did with Scotrail in April this year".
Transport minister Jenny Gilruth said in an answer to a parliamentary question in October that a new contract with Serco – the firm that has run the service for the past seven years – does not represent “value for money to the public”.
The franchise was due to end on June 25, next year rather than run its entire term to 2030 after Serco tried to renegotiate the terms of the contract through a process known as rebasing.
Under legislation, ministers had the option to put the contract out to tender, or make a ‘direct award’ back to Serco or to a company owned and controlled by the Scottish Government – the latter effectively being public ownership.
John Whitehurst, managing director of Serco’s transport business, said they had hoped to revised the terms of the contract to put the service on a "more sustainable footing" and that it had been "loss-making over the life of the contract".
The decision came after the Scottish Government was accused of “inconsistency and double standards” by not including the Sleeper franchise in its nationalisation plans.
Transport Secretary Michael Matheson announced in March, last year that ScotRail franchise would be switched to state control when Abellio’s ten-year contract was terminated three years early after performance issues.
Now Ms Gilruth has indicated a U-turn after another parliamentary question about what assessment it had made of the financial impact of a direct award to Serco for the service.
She said: "In accordance with Scottish Ministers franchising policy statement, appropriate assessment of a direct award to Serco Caledonian Sleepers Ltd. is being made and ministers will inform Parliament when this assessment is concluded."
Richard Leonard, the Central Scotland MSP, who is also convenor of the National Union of Rail, Maritime and Transport Workers' Scottish parliamentary group believes that shows ministers are planning to hand the Caledonian Sleeper service back to Serco.
Both he and the union say that if this happens it is likely to mean the contract being awarded on more favourable terms than the original franchise agreement, with cost risk and revenue borne by the Scottish Government and Serco receiving fees, for profit, to run services.
They are now calling on the SNP and Greens to instead take the Sleeper into public ownership and reintegrate it with the ScotRail franchise.
Mr Leonard said: “To even contemplate handing this historic service back to Serco, which has proved time and again it is not fit to run our railways, is a betrayal of passengers and staff.
"The SNP and Greens must not bow to corporate pressure again, the Caledonian Sleeper must be brought into public ownership to be run by and for the people.”
ScotRail is now under the direct control of the Scottish Government through an "arms-length" company. The move has raised questions over whether the Scottish Government now intends to nationalised the sleeper service.
The service normally operates trains six nights a week between Aberdeen, Edinburgh, Fort William, Glasgow, Inverness and London.
In March, 2015, Nicola Sturgeon unveiled the new look exterior of the new Secro franchise, which was set to transform the famous cross-border rail journey into a "hotel on wheels".
The First Minister was in Inverness to launch the the service's new White Stage branding which was to become a symbol of the new Sleeper franchise.
The Scottish Government took the decision to create a standalone Sleeper franchise separate from the ScotRail umbrella for the first time as part of an ambition to revamp the overnight London-Scotland service into "a tourist rail experience to rival the best in the world".
Serco at the time also ran Australia's iconic transcontinental India Pacific service, linking Sydney and Perth, and the Dubai Metro.
RMT general secretary Mick Lynch said: “The Scottish Government is already running the ScotRail franchise in public ownership and it would provide better value for money for taxpayers and passengers if it were to reintegrate the Caledonian Sleeper with ScotRail.
“Therefore, it seems absurd that the Scottish Government has admitted it is considering making a further direct award to Serco, which will allow the private company to continue profiting from public funds.
“The Serco Caledonian Sleeper franchise has been beset with problems throughout the duration of the franchise, and the Scottish Government must now abandon any plans to hand it a further contract and instead commit to running Scotland’s rail passenger services in one publicly owned company.”
Mr Whitehurst said after ministers said Serco were being stripped of the franchise two months ago that when it took over the service in April 2015, they inherited an "unreliable and outdated fleet of carriages dating back to the 1970s".
He insisted the service that Serco provided was widely recognised as being "outstanding, providing hotel standard service and accommodation that is renowned and admired around the world and loved by the people who travel on it".
He said the contract signed in 2014 included a ‘rebase clause’ that meant that, after seven years of the 15-year franchise, Serco could present to the Scottish Government alternative financial arrangements for the remaining years of the franchise.
He said the Scottish Government and Serco were not able to reach agreement on these revised terms, and that the management of the Sleeper would be handed back to the Scottish Government.
Mr Whitehurst added: “We note that the Government’s decision not to accept our proposals has not been made due to any performance issues; from Serco’s point of view the service has been loss-making over the life of the contract and the proposals that we made to Transport Scotland were to put it on a more sustainable financial footing. "We will continue to work with Transport Scotland around options for the future management of the service and in the meantime will continue to deliver a world-class service for our guests.”
Existing services and timetables were to continue until the end of the contract.
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