Chris Grayling’s East Coast bailout echoes the errors of New Labour

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Virgin and Stagecoach have been rewarded for leaving taxpayers in the lurch. It’s time government stopped pandering to the super-rich

Chris Grayling’s bailout of Sir Richard Branson and Sir Brian Souter is so crass you may think him plain stupid. But that would be to mistake the ideology behind the transport secretary’s shameless rewarding of the billionaires for walking away from the outstanding £2bn they were contracted to pay for running the East Coast rail franchise until 2023.

On the same day Virgin Trains East Coast, a joint venture 90% owned by Souter’s transport group – Stagecoach, and 10% by Branson’s Virgin – deserted the London-to-Edinburgh line, Grayling awarded Virgin, without competition, a lucrative contract to operate the west coast mainline between London and Glasgow. He also allowed Stagecoach to bid for the next three rail franchises, and even held out the prospect that Souter could be re-awarded the east coast service he had just abandoned, but without the £2bn albatross.

In his statement justifying this corporate largesse, Grayling was a belligerent apologist for Virgin and Stagecoach, praising the very companies that had just left passengers and taxpayers in the lurch.

The reason for this is ideological. Grayling won’t contemplate the alternative to bailouts – because it is nationalisation. The east coast mainline is immediately at stake but Grayling fears, probably rightly, that once a state company takes over one failing franchise, it might end up with a large part of the national train set.

In Grayling’s warped and partisan mind, billionaire bailouts are preferable to any state control. As an arch Brexiter and neo-Thatcherite, it’s all justified as a means to victory in a bloodless civil war against Jeremy Corbyn. It is the same mentality by which, as justice secretary, he destroyed the probation service in a botched privatisation, and even denied prisoners the right to receive books – the most heartless act by a minister in living memory.

Grayling has got this far because of the Brexit-induced collapse in civil service morale. Senior officials at the Department for Transport should have referred the first Branson bailout, last November, to the National Audit Office. Civil servants are becoming nervous, because of the escalating Branson bailout campaign and signs of interest from the state auditors. A month ago I added to the pressure by resigning as chair of the national infrastructure commission. I was alarmed at Grayling’s cavalier disregard for proper standards of ministerial behaviour, and could see Branson and Souter riding roughshod over a demoralised Whitehall.

This week’s further bailout was therefore more circumspect. Grayling’s statement included reference – probably at the insistence of government lawyers – to a “transparent value for money assessment” before Branson/Souter regain the East Coast franchise. But this was immediately followed by a panegyric to privatisation and the evils of nationalisation. So no one doubts where Grayling’s “transparent assessment” will end up on the relative virtues of state control of the east coast service as opposed to re-awarding it to Virgin-Stagecoach under the guise of a not-for-profit contract, which will hardly require a profit after the hefty operating charges and fat-cat salaries are built into the pre-profit charges.

Grayling can, however, be stopped in his tracks. A strong campaign against him will cause Theresa May and Sir Jeremy Heywood, the cabinet secretary, to worry that his student-union politics imperil the government. Labour will take up the cause with relish. In this case, rather than nationalisation requiring the “magic money tree”, incompetent privatisation is costing the taxpayer dear. My newfound friends at Momentum, since I left the commission, love my line that Grayling is doing more than Corbyn and Karl Marx combined to make the case for public ownership.

It is starkly obvious that since Thatcher we have allowed the private sector to spiral out of control. The state must regain its authority as guardian of the public interest. It needs the power to stand up to strong corporate ventures, such as Branson’s and Souter’s, that have leeched off the public purse for decades and now exert control over the government departments supposedly contracting with them.

I readily accept that the Blair government failed to tame the wild west that is the private sector. In retrospect, too many of its leading lights were in awe of the super-rich, and indeed were determined to become super-rich themselves. We need to be clear whose side we are on. The pragmatic, incorruptible Clement Attlee should be our inspiration. Otherwise the future for Britain is dystopian.

Rail users long ago glimpsed it in the disastrous privatisation of the UK’s track operator by John Major’s Conservative government. After a succession of scandals, Railtrack was effectively nationalised in 2001. Network Rail, as it now is, hasn’t been brilliant, but it is far better than what went before.

What is the model for an efficient public company, which doesn’t look like the infamously miserable railway sandwich? Step forward, Transport for London. Twenty years ago, London’s buses and tube were a byword for inefficiency and backwardness. Now, after two decades of excellent public leadership and sustained investment by government and the Greater London authority, they are an international model. When Crossrail, London’s new east-west line, opens next year, the public’s imagination will be blown away.

It’s back to the future. In 1933 Herbert Morrison, Labour’s innovative leader of the London County Council during a dismal Tory decade, created the London Passenger Transport Board, which transformed public transport in the capital. It became a template for the Attlee government’s programme of pragmatic but radical social democracy after 1945.

So hail Chris Grayling, handmaiden of Corbyn and McDonnell. You have nothing to lose but your trains.

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