The Caledonian Sleeper service’s operating contract is being terminated by the Scottish government seven years early. June 2023, Serco will stop running the cross-border rail service.
Serco had claimed that in order to put the losing service on “a more sustainable financial footing”, it attempted to renegotiate the contract. However, Transport Minister Jenny Gilruth stated that the proposals were turned down because they did not provide the general public with value for their money.
“I can confirm that today Serco Caledonian Sleepers Limited has been advised that its proposal to rebase the Franchise Agreement with Scottish Ministers for the provision of Caledonian Sleeper rail services has been rejected on the grounds of not representing value for money to the public. Additionally, I can confirm that a notice was served today which confirms that the Scottish Ministers will terminate the Franchise Agreement with Serco Caledonian Sleepers Limited on 25 June 2023.
“Work is underway to determine arrangements for the continued provision of Caledonian Sleeper rail services beyond 25 June 2023 and this will be updated to Parliament once determined. It is worth noting that Serco Caledonian Sleepers Limited has, broadly, delivered well and significantly improved Caledonian Sleeper services over the last 7 years.”
A fleet of outdated carriages and unreliable locomotives
A new £150 million fleet of trains from Serco was introduced in 2019, and the business said they will “transform” travel. It stated that 75 new carriages were currently in use. The company’s managing director of transportation, John Whitehurst, said in a statement that the fleet of carriages it had inherited was “unreliable and outdated”, dating back to the 1970s.
“When Serco took over the Caledonian Sleeper service in April 2015, we inherited an unreliable and outdated fleet of carriages dating back to the 1970s.
“We are extremely proud that under our leadership and management we have introduced new rolling stock and other significant innovations that have completely transformed the service. The service that Serco provides today is widely recognised as being outstanding, providing hotel standard service and accommodation that is renowned and admired around the world and loved by the people who travel on it. We thank the Minister for her warm words recognising the achievements of the Serco Caledonian Sleeper team.”
It was also revealed that a provision in the contract permitted Serco to attempt to renegotiate the terms through a procedure called “rebasing”.
“The contract that was signed in 2014 included a ‘rebase clause’ that meant that, after seven years of the 15-year Franchise, Serco could present to the Scottish Government alternative financial arrangements for the remaining years of the Franchise. The Government and Serco were not able to reach agreement on these revised terms, and accordingly the Franchise will now end in June 2023, at which point, unless other arrangements can be agreed, Serco will hand back the management of the Sleeper to the Scottish Government.”
Is the next stop, public ownership?
The two sides, according to Mr. Whitehurst, were unable to come to an agreement.
“We note that the Government’s decision not to accept our proposals has not been made due to any performance issues; from Serco’s point of view the service has been loss-making over the life of the contract and the proposals that we made to Transport Scotland were to put it on a more sustainable financial footing. We will continue to work with Transport Scotland around options for the future management of the service and in the meantime will continue to deliver a world-class service for our guests.”
The Scottish government now has a chance, according to the SNP, to think about bringing the Sleeper to public ownership, as it did with ScotRail earlier this year. Former minister Fiona Hyslop was quoted in The National as saying the move represented an “opportunity” to bring the service into public ownership.
“The Caledonian Sleeper has been well-served by Serco over the seven years it has run the service and it has broadly improved it over that time.”
If the service were nationalised, it would be added to the Scottish Government’s portfolio of transportation services alongside ScotRail and CalMac.
Will that deliver better value for money? At this point it may be unlikely anyone actually knows.