Stagecoach banned by Government from competing for rail franchises

A Stagecoach depot. Pic: Frank Reid.
A Stagecoach depot. Pic: Frank Reid.
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Stagecoach has been banned from competing for three rail franchises by the Government because of a row over pensions.

The train and bus operator said it was verbally informed by the Department for Transport that it has been disqualified from three UK rail franchise competitions - East Midlands, South Eastern and the West Coast.

Bidders for the franchises were asked to bear the full long-term funding risk on relevant sections of the Railways Pension Scheme, Stagecoach said.

It added that the Pensions Regulator is seeking additional funding because of “serious doubts” over the Government’s ongoing support for the industry-wide scheme.

Martin Griffiths, chief executive of Stagecoach, said: “We are extremely concerned at both the DfT’s decision and its timing. The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.

“The Pensions Regulator has indicated that an additional £5bn to £6bn would be needed to plug the gap in train company pensions.

“In contrast, the rail industry proposed solution would have delivered an additional £500m to £600m into the scheme. This would have provided better stability and security for members and much better value for taxpayers.

“We are shocked that the Government has rejected this for a higher-risk approach. We would urge that a full independent value for money review is undertaken into this issue without delay.”

A DfT spokesman said: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.

“Stagecoach chose to propose significant changes to the commercial terms for the East Midlands, West Coast Partnership and South Eastern contracts, leading to bids which proposed a significantly different deal to the ones on offer.

“We have total confidence in our process. We have awarded the East Midlands franchise to Abellio after they presented a strong, compliant bid.

“Stagecoach have played an important role in our railways and we hope they will continue to do so post the conclusions of the Rail Review.

“However, it is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”