The too-clever-by-half CEO is gone and now the very existence of National Express is in doubt. Lord Adonis has said this morning that the East Coast mainline franchise is to be nationalised and NE's other franchises are in jeopardy due to contract terms.A fine mess, here comes the Government to clear up a poor private sector bid. The Government will say they have done nothing wrong; are they right?
I don't think so, by setting up auctions that allow prices to be bid up to high they set themselves up for a fall. Down the line companies won't be able to make the payments so they will fail and the contracts will be handed back.
Think of it like a bank offering you too much on a mortgage, when you fall into negative equity it is the Bank that loses more than yourself. The Government are too obsessed by getting the money in. Not enough due diligence was done on the winning bid, end of story.
We have seen this many times before with the Government, perhaps the 3G mobile auctions being the best example. The UK went from having some huge international dominant operators in O2, Orange and Vodafone to having the first two swallowed up by weak competition as they struggled with the debts they had saddled themselves.
Of course, the companies make the bids and so should be held to account, this is not all the fault of Government. But in desperation for money, both private and public sector are wasting it on a colossal scale instead. More thought by Government could stop this, as could more thought by the private sector.
