Paul Vallely: Euston, we have a problem

There are only two ways to make more money from the railways - increase fares or cut staff

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I wrote to a local MP last week, not something I do often. Graham Brady is chairman of the Tory 1922 Committee, as well as the member for Altrincham and Sale West, so I thought he might be able to do something about what was alarming me. He didn't reply; perhaps he knew it was already too late.

The reason for my impulsive engagement with the political process was a rumour that I'd heard circulating in south Manchester, where I live. It was that the Government was about to remove the West Coast train line, which joins us to the capital, from Virgin Trains, which runs it rather well, and give it to a company with a reputation for much worse service.

When I left London for the North well over a decade ago, returning to the metropolis for the occasional day trip required the kind of effort associated with launching an expeditionary force. Trains were run-down, infrequent and unpunctual, the staff grumpy and demoralised. You got back home exhausted.

But after some initial bumps in the track Virgin Rail has transformed the railway into a clean, quiet, comfortable service. Trains run to London every 20 minutes: if you miss one, by the time you've had a coffee the next has arrived. The fastest do the journey in under two hours. The staff are efficient and friendly. Above all, the trains almost always leave and arrive on time. Small wonder that Virgin has doubled its travellers. And its smoked salmon and scrambled egg breakfast is almost worth getting out of bed for. If you get the early morning red-eye to Euston you can be at a 9am meeting before some of the Londoners.

This matters beyond Manchester because the decision to drop Virgin illustrates the priorities of this Government: short-termism, a myopic focus on the bottom line and a disregard for those who bear the consequences. Hence a decision incomprehensible to those who regularly use the route.

There was no tie-less Richard Branson, and certainly none of his airline-style stewardesses in evidence at Stockport station at 7am on Thursday, the morning after the Government announced its decision to award the West Coast franchise to the transport giant FirstGroup, which carries more than 2.5 billion passengers a year in the UK and North America – with, from many accounts, scant regard for the best interests of the travelling public.

But there were plenty of Graham Brady's constituents on the platform, some of them reading in their Daily Telegraph the revelation that the Department for Transport had rated Virgin's bid as more "deliverable" than FirstGroup's. The latter had offered more trains, more seats and lower fares, but on projections of growth in passenger numbers that seem very unrealistic. Yet ministers had ignored that and dumped Virgin.

The mood at the station was glum. The staff feared FirstGroup's hidden agenda was job cuts. The passengers read accounts of First's existing services in the West Country, Scotland and London. The tales were of dirty, overcrowded trains, poor punctuality, last-minute cancellations and journeys to London in some cases slower than in Victorian times. "The contempt... for its passengers is palpable," one passenger moaned.

Even allowing for standard British levels of whingeing, the anxiety was that First's promises – of more trains, more seats and lower fares – rang somewhat hollow. It felt like what railway workers call a Spad: a signal passed at danger.

There are only two ways to make more money from the railways – to increase revenues or to cut costs. FirstGroup has predicted 7 per cent more passengers every year for the next 14 years, which seems wildly optimistic off the back of a double-dip recession. That means fare increases, or job losses. Or both. And, if the passengers and revenue forecasts in Virgin's bid prove correct, First will make losses which could top £1.5bn by the end of the franchise.

Something similar has happened twice on the East Coast line. There, both GNER and National Express, consecutively, outbid Virgin. Each found it couldn't make a profit. They handed the keys back to the Government, and the outdated and under-funded line is now nationalised. Those who fear that First will do something similar point out that it, quite legally, recently pulled the plug on its contract to run Great Western when £800m in payments to the Exchequer fell due. Mr Brady's constituents could be forgiven for thinking that this is all an accident waiting to happen.

There is something more alarming. The Government has asked for a bond from First that will be forfeit if it walks away. But this is only £245m and, if Virgin's figures are right, faced with a £1.5bn loss First executives might feel that is a pricing worth paying.

So, if things turn out well, the private sector takes the profits; if things go wrong, the taxpayer will pick up most of the bill. Sounds like the massive bank bail-out, or the G4S Olympic debacle, all over again. To rework a phrase from an Apollo 13 moon flight astronaut, Euston, we have a problem. And if the train service deteriorates, and the Liberal Democrat vote collapses at the next election as expected, so might Graham Brady.

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