Changing Trains

In the grand scheme of things, the fiasco surrounding the award of the West Coast rail license to FirstGroup counts for little, but unfortunately it reminds us of what we already knew: ministers are responsible not for their departments, or to ordinary people. The only responsibility of a minister these days on which he or she will be evaluated by his or her prime minister is the fervour with which they hold the line.

Richard Branson & Virgin Trains said, over and over again, that FirstGroup could not possibly run the West Coast line on the terms upon which the contract had been awarded to them. Possibly that sounded like sour grapes from an incumbent who had been cheated of a lucrative contract but - if it were you or me - I think we might have just checked.

After all, the accusation from Virgin was not vague.

Time and time again, however, those tasked with defending the decision came out and said that everything was fine, no need to worry. Justine Greening, then Transport Secretary, is subject of an article in the Belfast telegraph from 28th August that is retrospectively damning. The article points out that the award to FirstGroup had been called into question by Virgin trains, The Labour Party and the Commons Transport Select Committee yet she still intended to sign the contract.

She was only prevented from signing the deal - and thereby committing taxpayers to a deal which would have cost them hundreds of millions of pounds - by legal action on the part of Virgin.

Moreover, her successor was hardly less staunch. Last month he told the Transport Select Committee: "I am satisfied that due diligence was done by the department and therefore the intention is to go ahead with the contract when we can. We are determined to press ahead with the award that we have made[.]"

When a Minister of the Crown tells MPs that he is satisfied with his department's due diligence, that satisfaction is supposed to predicated on something. Yet now the government is trying to shrug their failure on this question. We are told that "ministers could not be expected to delve into the minutiae of the [..] complex deals."

But of course, there was no need to delve into details. Virgin had already identified where the problem lay, and all it needed was for one of out Transport Secretaries to have the humility to think: "these guys are suing us ... maybe just check that out."

Had they done so, the scale of the blunder would have been immediately obvious, because FirstGroup was essentially placing a one-way bet against the UK taxpayer. A company worth £900 million was saying that if enormously optimistic forecasts of growth were achieved, then it would pay back £13.3 billion in cash by 2028. Repayment was staged in such a way that FirstGroup repaid comparatively little until almost nine years into the contract term.

In order to secure the considerable revenues of the West Coast line (£824 million last year) FirstGroup were only being asked to guarantee a sum of £190 million, which would have been what the taxpayer would have been able to recoup if FirstGroup went bust as the higher payments fell due.

You don't have to be a Dragon to reject this deal, yet at least two ministers backed it with extraordinary zeal, just as (one need hardly add) Jeremy Hunt backed the Sky deal before them. Presumably they, like FirstGroup, calculated that if a week is a long time in politics then 2021 was an eternity away.

The immediate loss to the taxpayer is being estimated at £300 million, which we can doubtless measure in terms of the firm cost-saving measures favoured by this government.