Stagecoach boss: free bus travel comes at a cost

The government is putting bus services at risk by concealing the cost of free travel for pensioners from the public, according to the boss of Stagecoach, who compared the policy to ordering Tesco to give OAPs free food.

Martin Griffiths, chief executive of the transport firm whose takeover of the public sector East Coast trains was confirmed on Wednesday, also accused the Labour leadership of having “crazy ideas” about railways.

Stagecoach unveiled a 2% rise in half-year profits to £123m, but its share price slid nearly 7% as the firm warned that growth could slow in its high-earning UK bus operations. The group pointed to uncertainty caused by possible reregulation of services in Newcastle and Manchester, where it is a leading operator.

Tyne and Wear has voted to bring bus services under public control, citing financial pressure due to coalition cuts and the £30m annual bill it faces to provide concessionary travel.

Griffiths said: “I won’t provide a service and not get properly paid for it. You would not go to Tesco and say to them – great idea, we’re going to let OAPs have free food. They cannot stand up there and be dishonest with people and say we’re going to have a scheme but not fund it properly. That punishes people who do pay, whether it’s full-fare paying adults or the children or young adults who I want to be the passengers of the future.”

He declined to say whether the pensioner bus pass should be axed, but added: “Are there some passengers who board our buses who could probably afford to pay? Of course they could. As a voter, I want to know bus services are going to be protected. They have to decide what is the prioritisation. They can’t be dishonest just because these people vote – 8 million of them, they all vote … so ooh, don’t tamper with the concession scheme. Politicians are being disingenuous with all of us.”

Labour has pledged to give more power to cities to set bus routes and fares. The chancellor, George Osborne, also recently indicated he would grant London-style powers over local transport to Manchester.

Griffiths said: “Was I surprised to see words like franchising in that debate? Yes.”

He added: “I know that is in there without any thought to what that might mean, how it will be funded, and what the consequences might be for taxpayers, passengers, and our businesses.”

Griffiths insisted that attempts in the north-east to end deregulation were being pursued for ideological reasons, adding: “This is more about control rather than what’s good for passengers.” He said talk of superprofits was “a nonsense”.

The family fortune of Stagecoach chairman Brian Souter and his sister Ann Gloag was reported this year to have passed £1bn, but, Griffiths said: “Whatever shareholders get out of it, that’s reflected the risk and reward. We’ve invested hundreds of milllions … if shareholders get some return, I’m fine with that.”

Griffiths, who chairs the rail industry body, the Rail Delivery Group, also lashed out at Labour plans to reform rail by allowing public sector firms to bid.

“No one’s laid out how you can do that and make it work … it’s unnecessary. You get all of this rhetoric about public sector, private sector bidder – complete nonsense.”

Griffiths said he had had very positive discussions with some “educated” Labour politicians, particularly Ed Balls, who he said was “as open as he could be about what his challenges are”.

“Ed [Balls] understands us. If you’re the chancellor, it’s like being the finance director. Crazy chief executives can have wild ideas. Crazy potential prime ministers can have crazy ideas, but we’ve all got to be able to afford them. Some of the stuff about rail and bus at the moment I find remarkable. We’ve got to be careful not to mess with structures that are delivering.”

Stagecoach runs East Midlands and South West Trains, as well as Virgin Rail in partnership with Richard Branson. Virgin-branded trains will run on the East Coast line from February, under a new Stagecoach-Virgin joint venture, after five years of the state-owned Directly Operated Railways running the line. The sealing of the contract returning the line to the private sector was announced on Wednesday.

Michael Dugher, Labour’s shadow transport secretary, said the rushed franchising process was “a betrayal of taxpayers and the travelling public. David Cameron has put privatisation ahead of the public interest.”

Stagecoach is expected to pay £3.3bn in premiums over eight years, with new trains – funded by the government – adding 50% new capacity from 2019. However, Griffiths said: “You can’t just put it on and the capacity magically fills up. That’s where the private sector comes in.”

Griffiths said he believed Labour’s rail plans were playing to the gallery rather than serious reforms.

“They’re politicians. That’s what they do. You’ve got to try to distil down the rhetoric from the deliverable. There will be lot more rhetoric, it would be naive to think otherwise.”

He added: “Our educated politicians do understand what the private railway has delivered, and what the benefits are. Performance. Safety. Growth.

“It really irks me that we get leftwing politicians in this country, that’s their story, fat cat rail companies – it’s rubbish.

“You want to take peak fares down 10% – great, it’ll be hugely populist, for about a week. Then we’ll have huge overcrowding on the railway and a whole host of other problems.

“The myth is fares go up, firms make profit. It’s rubbish. I’ll tell you, for the risk we run, and the management effort my team put in, we get underpaid.”

Griffiths earned £2.2m last year, as he took over from chairman Brian Souter after 13 years as his chief finance officer. Stagecoach’s new CFO, Ross Paterson, was paid £1.3m.

Yesterday the group announced it would pay a half-yearly dividend of 3.2 per share, netting an extra £2.8m for chairman Souter.