Labour accuses Grayling of misleading parliament over Stagecoach ban

The Secretary of State for Transport, Chris Grayling, has been accused of misleading parliament over banning Stagecoach from bidding for rail franchises as it would not take on the pension risk of the Railways Pension Scheme (RPS).

The Times has seen a document from a senior Department for Transport (DfT) official that stated “all bids contained some non-compliances”, signed with the authority of Grayling.

However, this appears to contradict a statement he made in the House of Commons, on the 2 May. He was asked by Labour shadow Transport Minister, Rachel Maskell, why only Stagecoach and Arriva were disqualified from the competition, when the DfT has confirmed all three bidders were non-compliant.

However, Grayling replied: “Because it is not the case that all three bidders were non-compliant”. Maskell pressed further, accusing Grayling of withholding sensitive market information between 1 and 9 April when disqualifying Stagecoach from the rail franchise competitions.

She accused him of “interference” and said it “further discredits the franchising process”.
“I am afraid that the hon. Lady’s question is based on a totally false premise. She is incorrectly accusing me of interference, and she is incorrectly making assertions about non-compliant bids which are simply inaccurate,” Grayling stated in response.

According to The Times, Labour has called on the Transport Secretary to return to the commons to clarify the situation. Maskell told the paper that Grayling has “once again not been straight with parliament”.

“Legal disclosures from his own department issued under his authority show that, in fact, all bids contained non-compliances. This cavalier approach to the procurement process is wasting millions of pounds of public money. The transport secretary must urgently come to the House of Commons and correct the parliamentary record.”

Last month, it was revealed that Stagecoach had been disqualified from bidding for three current UK rail franchise competitions as it would not take on open-ended pension liabilities.

The DfT informed the group that it had been formally excluded from the process, after submitting “non-compliant bids” in relation to the pension schemes, which are thought to have a deficit of £5-£6bn.

Stagecoach, which was shortlisted for East Midlands Rail, South Eastern Rail and the West Coach Partnership, said that its bid was “consistent” with industry guidance, however the DfT said the group had made “significant changes” to the commercial terms of the bidding.

At the time, Stagecoach Group chief executive, Martin Griffiths, said: “We are extremely concerned at both the DfT's decision and its timing. The department has had full knowledge of these bids for a lengthy period and we are seeking an urgent meeting to discuss our significant concerns.

"We bid consistent with industry guidance issued by the Rail Delivery Group and shared with the DfT.”

Stagecoach, which owns 49 per cent of Virgin Rail Group, said that it “strongly” believes that the private sector should not be expected to “accept material risks it cannot control” and that its bid was “consistent” with industry guidance.

Despite this, the DfT insists that it was just Stagecoach which had changed the terms of the franchise competition, leading to a bid “which proposed a significantly different deal to the ones on offer”.

A DfT spokesperson said: “Stagecoach is an experienced bidder and fully aware of the rules of franchise competitions. It is regrettable that they submitted non-compliant bids for all current competitions which breached established rules and, in doing so, they are responsible for their own disqualification.

“Stagecoach have played an important role in our railways and we hope they will continue to do so post the conclusions of the Rail Review. However, it is entirely for Stagecoach and their bidding partners to explain why they decided to repeatedly ignore established rules by rejecting the commercial terms on offer.”

The government added that unlike the winning bidder of the East Midlands franchise, Abellio, Stagecoach did not accept the risk-sharing mechanism set by the government, “which reduces the risk that operators are exposed to.

It said that in the event the deficit recovery contributions change at the next valuation, the government would share some of the upside/downrisk of the changes with the operator.

As a result of the decision, Stagecoach said that it is evidence that the franchising model is “not fit for purpose” which “further damages that already fragile investor confidence in the UK rail market”.

When asked about the effect this will have on the RPS, a TRP spokesperson said: "We are working closely with the scheme trustees, Rail Delivery Group and the DfT to ensure the best possible outcome for pension scheme members.

“Part of this work is to ensure the scheme is adequately funded so that members receive the benefits they expect. We are not able to comment further."

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