Virgin and Stagecoach call for rail franchises to be scrapped on inter-city routes to improve competition

Sir Richard Branson, founder of the Virgin Group (AP Photo/Chris Pizzello)
Sir Richard Branson, founder of the Virgin Group (AP Photo/Chris Pizzello)
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SIR RICHARD Branson’s Virgin and Stagecoach have called for rail franchises to be scrapped on inter-city routes and replaced by a licensing system.

The companies claim that a new system of licensing rail operators and allowing them to compete directly on inter-city routes would boost competition and give a better deal to customers and taxpayers.

Stagecoach Group and Virgin call for the new approach to be piloted on the East Coast, West Coast, or Great Western routes. The two companies jointly run the East Coast and West Coast franchises.

The proposal is included in a joint response by Stagecoach and Virgin to a consultation by the Competition and Markets Authority (CMA) on potential reform of UK passenger rail services after 2023.

The two companies believe the licensing system should be introduced on inter-city routes in place of franchising.

It would also replace the current “confused and damaging” open access regime where the Government competitively lets rail franchises, but then other operators are allowed to selectively run competing services on some routes without having to pay the same charges or meet the same specification, the companies said.

Stagecoach and Virgin said this approach “singularly fails to maximise the benefits of competition for rail passengers and taxpayers”.

Franchising would continue to be the best approach for all other routes, such as south-east commuter networks, with no open access arrangements, Stagecoach and Virgin argue. This is because operational, capacity and commercial constraints mean full “in market” competition is not

likely to be viable, the response said.

“We are pleased that the CMA itself recognises in its consultation document the benefits achievable on parts of the rail network from competition ‘in the market’ rather than from competition ‘for the market’ through franchising,” the Stagecoach-Virgin response states.

“Stagecoach also believes that the stunning success of commercial bus networks in the UK provides clear evidence of the value of ‘in market’ competition to customers and taxpayers.”

The CMA announced in July that it was launching a consultation process about the possibilities for greater competition between train companies in the UK.