Britain to renationalise East Coast rail line as profits fall short

Britain to renationalise East Coast rail line as profits fall short

"I plan to use a period of operator of last resort control to shape the new partnership", said Mr Grayling.

LNER will take over the running of the line from June 24.

Virgin Trains East Coast - a partnership between Stagecoach and Virgin - was awarded the franchise for eight years in 2014.

The decision to temporarily bring the line back into public ownership is politically embarrassing for the Government, which has repeatedly defended the private franchise model for the railways.

The future of Virgin Trains East Coast has been in doubt since the Transport Secretary Chris Grayling announced in February the line may need to be taken back under government control after the franchise holder breached its contract.

Despite this, Grayling denied it was a "failing railway" and insisted taxpayers had not lost out, claiming "the route continues to generate substantial returns for the Government".

LNER will have a new board and an independent chairman, and in a departure from past practice will feature representatives of both the train operating team and state-backed track owner Network Rail Ltd., Grayling said.

This transfer could also see Transport for London incorporate more shorter-distance routes into its London Overground operation.

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Because Stagecoach and Virgin are escaping some of their scheduled payments, critics said halting the franchise early amounted to "a bail-out" by the taxpayer of the private sector operators.

Stagecoach's chief executive, Martin Griffiths, said the firm was "surprised and disappointed" by the decision. "Privatised rail is broken beyond fix yet the Tories are still handing these services back to the private sector because they are wedded to a broken free market ideology".

"While reliability must continue to improve, and promised and new investments made, passengers will continue to judge services by the performance on the day of the train company and Network Rail, value for money, cleanliness of the train and crowding levels".

The government has said that it does not intend to strip Virgin and Stagecoach of the franchising passports which they hold, and thus they would be able to bid for future franchises.

Mr Grayling told parliament that Stagecoach and Virgin have lost nearly £200m, but that this had not been a loss to taxpayers "at this time".

They will operate under "one of Britain's iconic rail brands", the London North Eastern Railway, Mr Grayling said.

McDonald pointed out that the government had failed to impose restrictions on what Virgin and Stagecoach could do next, calling the statement "a smokescreen to divert attention from the failings of his policy".

GNER was stripped of the route in 2007 after its parent company, Sea Containers, suffered financial difficulties, while National Express withdrew in 2009.

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