We now have a real chance to construct a not-for-profit benchmark for our railways

By Mike Katz

A key element of yesterday's decision by Transport Secretary Lord Adonis that the Government was taking control of the National Express East Coast operation was that NX had tried to wriggle out of their contract and negotiate a fee to keep hold of the franchise on less onerous terms.

Adonis called it right. Despite being close to sign-off, apparently he vetoed the idea, saying that train operators should stick to their contracts – or lose out.

This is certainly the right tactical approach.  As Adonis told the Lords yesterday, if he had let NX cut a deal all the other operators would be “queueing round the block” to renegotiate their contracts.

But it was the right principle too. These private firms were more than happy to boast about the innovation and risk management they could bring to the railways when times were good. They seemed less eager to take the revenue risk when passenger numbers fell.

But what happens next is important too. There are some strong arguments for experimenting with the not-for-profit franchise model which was successfully proposed by rail unions ASLEF and TSSA in the last Warwick agreement. Now two firms have failed to deliver the much-promised £1 billion plus in premiums on this franchise (anybody remember the fate of GNER, just two years ago?)

So why not experiment with a not for profit model? If nothing else, it would provide a benchmark to help judge the costs and efficiency of operators on other routes and future franchise bids – something we have never had in rail.

The Tory response to this has been pathetic and shows they really still have little constructive to say when it comes to public transport.

Shadow Transport Secretary Theresa Villiers is grasping at straws when she argues that the Government has used the franchising to push the franchise bidders to “make wildly optimistic bids”.  Who put a gun to their heads? These are stock-market listed corporations operating across the world, not easily bullied dopes.

This will give little confidence to remaining franchise holders – or future bidders – that the Tories have a clue how franchising works.

Now the decision for Adonis is whether to take NX’s other two franchises - C2C and East Anglia back into the public sector. Given the parlous state of their finances, it is hard to see how long they can hang onto them. Rather than continue with uncertainty, surely it would be better to take the keys back now. Ironically, the three routes would give you the perfect span of all the different kinds of railway - an inter-city, a commuter and a regional network. What a great basis for constructing a not-for-profit benchmark for the industry.

You don’t need to be a die-hard supporter of the train unions’ calls for renationalisation to appreciate that if you are going to use the private sector to deliver public services, the very least you can do is take them at face value. It only works when firms are held to their contracts, and are seen to be held to their contracts. So yesterday was, perhaps a bit counter-intuitively, a good day for the railways.

Mike Katz is Chair of the Labour Transport Group and writes in a personal capacity