GNER franchise win sparks cost cuts fears

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The Independent Online

Fears were mounting yesterday of job cuts, fare increases and a decline in standards on East Coast mainline rail services after GNER agreed to pay the Government £1.3bn to retain the flagship franchise for a further 10 years.

Fears were mounting yesterday of job cuts, fare increases and a decline in standards on East Coast mainline rail services after GNER agreed to pay the Government £1.3bn to retain the flagship franchise for a further 10 years.

Rail unions and passenger groups are concerned that to meet the huge increase in premium payments - which are thought to be £300m higher than rival bidders offered - costs will have to be cut to the bone and unregulated fares pushed higher. In the last nine years GNER has received a net subsidy of £200m to run the line between London and Edinburgh.

The franchise deal assumes passenger numbers will increase by about 30 per cent over the 10-year period, reaching 20 million by 2015. GNER has also factored in an increase in load factors so that its trains run 65 per cent full compared with the present figure of 50 per cent. Passenger revenues stand at £500m a year.

If GNER's revenues undershoot the target after the first four years of the franchise, then the Government has agreed to cover up to 80 per cent of the shortfall and will adjust the premium payments accordingly. If revenues exceed the target then the taxpayer will be entitled to keep up to 60 per cent of the extra income.

In addition to the franchise payments - which work out at about £100m a year after adjustments to GNER's track access charges compared with £22m a year at present - the company has agreed to invest £75m in refurbished high-speed trains and £25m on station improvements. It will also back a £70m scheme to electrify part of the line in Yorkshire, allowing an increase in services between London and Leeds to 40 a day in each direction.

The franchise has a break clause after seven years which the Government can invoke unless nine in 10 trains are running on time by then.

GNER's chief executive, Christopher Garnett, refused to rule out redundancies among the company's 3,200-strong workforce, saying the franchise would have to be run more efficiently, but added that he did not recognise a job-loss figure of as much as 10 per cent.

Commenting on the amount GNER has agreed to pay, he said: "I would rather overbid and win than underbid and lose, not that we did overbid."

Bob Crow, the general secretary of the RMT rail union said any attempt to pay higher premiums to government at his members' expense would be resisted. "If there is an attack on pay and conditions at the company it will be met with industrial action if necessary," he said.

Stewart Francis, the chairman of the Rail Passengers Council, welcomed the decision because it provided "continuity", but added: "Fare rises will not be welcomed until there is substantially increased reliability.

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