Re-franchising – still pain and not much gain?

IF bookmakers yesterday shortened the odds a little on a Labour victory at the next general election, I shouldn’t be at all surprised.  The Government’s announcement of its revised franchising policy for rail passenger services clearly indicated they expect to lose the next election in two years and one month’s time.  Re-franchising looks more like a political football than a genuine attempt to seriously improve things for passengers.

Twenty years ago, after MPs had approved the 1993 Bill to break up British Rail and privatise it into many parts, an ambitious franchising programme was drawn up with the intention of getting everything moved into the private sector before another general election. By hanging on to the last possible moment before going to the country in 1997, John Major just managed to achieve the target – and the new Labour administration found it was too late to halt the final stages of privatisation (and never did anything later to reverse it, either, despite its pre-election statements).

Now, after last year’s shambles, the Coalition Government and a Conservative-led Department for Transport have announced a revised franchising programme.  And its primary objective is to get the one franchise that is now publicly operated, East Coast, back into the private sector in February 2015, just three months before the deadline for another general election. Only in the three years after then would other franchises be re-awarded.

In some ways, yesterday’s was a clever announcement.  By focusing the media’s interest on the plans for East Coast it avoided too much initial attention being paid to the wider implications of the re-franchising plans. These are not so much a re-start of what had been stalled by last year’s shambles over the Intercity West Coast contract, but the start of an entirely new programme – and with some surprising, if not astonishing, extensions proposed to several current contracts, most notably Southeastern’s franchise being extended by no less than five years, initially by 28 weeks and then to 2018!

There was also news of some significant changes to the way some franchises are to be awarded – for example, the combined Southern/Thameslink/West Anglia new franchise will be, initially at least, a form of management contract to handle the merger and the introduction of a new fleet of Thameslink trains (for which, incidentally, a contract with Siemens in Germany has still not been signed).  And Great Western, too, is proposed to become a form of management contract in 2016 to cope with electrification and introduction of the new fleet of Intercity Express trains.

Yesterday’s announcement was also cynically timed, made on the day that MPs were packing their bags and heading back to their constituencies for the Easter break, so there was no danger of any serious debate.

Regional unhappiness

But the reality is now starting to sink in around the country, judging from a quick scan of the regional media.

In Kent there appears to be astonishment that Southeastern will be continuing to run that county’s trains for a further five years.

In the West Midlands, the extension of London Midland’s franchise to 2017 was reported to be ‘raising eyebrows’ after many people had complained that the GoAhead/Keolis consortium had not already been stripped of the franchise after last year’s extensive cancellations due a shortage of drivers.

To make matters worse, within 24 hours of the extension being announced London Midland was cancelling trains again – due to a shortage of drivers!

In Scotland, Glasgow’s ‘Herald’ newspaper carried the headline ‘Privatising East Coast line an express route to disaster.’ Its columnist Ian Bell pointed out that private enterprise had twice failed to make a go of running the line, and he added: “According to the figures for 2011/2012, the most recent available, East Coast in contrast posted a £7.1 million profit, up seven per cent on the previous year, while paying a £183.6 million ‘premium’ to the transport department. In other words, there is no serious financial case that can be made against state ownership.”

Directly Operated Railways, the Transport Department’s subsidiary ‘operator of last resort,’ said: “DOR has actively worked to prepare the business for a return to the private sector when the Government decided that the time was right.”

But it also added: “Since 2009, the East Coast business has been transformed. The Company has returned more than £640 million in cash to the taxpayer, achieved record breaking customer satisfaction, and last year delivered the best operational performance on the route since records began in 1999.”

Perhaps not surprisingly, Labour and the trade unions were also strongly opposed to the plan to re-franchise East Coast.

Maria Eagle, Labour’s Shadow Transport Secretary, said: “It is completely the wrong decision to focus obsessively on an unnecessary privatization of Intercity services on the East Coast, instead of prioritising getting the existing stalled franchise programme back on track.

“Ministers must be very careful not to mislead the public as they make their case for this misguided sell-off.”

And, certainly, one has to ask what will be the benefits for passengers in the revised programme?

Transport Secretary Patrick McLoughlin, in his statement to Parliament yesterday, said: “In rolling out the programme the Department for Transport will work closely with the industry to negotiate further new services and more capacity in all franchising contracts while delivering the best deal for both passengers and tax payers.’”

But I don’t think passengers should expect too much!

When the West Coast franchise was bid for last year, both FirstGroup and Virgin made substantial proposals, including new or additional trains and improved wi-fi systems, for example. But could it be that any such major benefits will not now be realized for anther four years, with only residual ‘cosmetic’ benefits – such as a couple of through trains a day between London and Shrewsbury and London and Blackpool?

If so, that will be pretty poor gain for passengers as a result of a catastrophic administrative cock-up by the Department for Transport.

3 thoughts on “Re-franchising – still pain and not much gain?

  1. The big problem with the franchise debate is that most of the arguments are driven by politics. Privatisation has become the catch-all scapegoat for everything that’s wrong with the railways, and conveniently allows people to ignore the real culprit, which is decades of public underinvestment both before and after privatisation.The reality is that almost all of the problems and challenges will still be there regardless of who runs the railways. Most of the decisions rail passengers don’t like are decisions where, in all probability, British Rail would have done exactly the same thing.

    No, if there’s one argument against the current franchising system, it’s the lack of arguments in favour. In 1996, the idea was that private investors, free from state control, would be able to invest large amounts of their own money to bring the railways up to date, with flagship projects such as, err, the West Coast modernisation. To be fair, not everything was a disaster (I remember what cross-country trains were like before the Branson treatment, and it’s a big improvement) but they were the exception rather than the rule.

    Now Railtrack has been renationalised and practically every major decision is being made by the government again. The government is broadly resigned to private investment not delivering the cash needed for these projects and is reverting to old-fashioned public investment. Maybe private management works better than public management, but the far less controversial concession system does that job too. So what benefits does franchising bring that concessions don’t? I don’t know.

    In fact, as far as I gather, the only reason the Laidlaw report rejected a switch to the concession system was the hassle of legislating for the change. If that’s really the only argument against, I’d say do it.

    • On hindsight even Bransons modernised Cross Country was,not that great an acheivment ,he replaced a mixed fleet with an entirely diesel one, doing thousands of miles daily under the wires,also despite having over half the fleet equipped with tilt this was never properly deployed or maintained to improve schedules until the creation of the seperate West Coast fleet

  2. Yes, franchising of the passenger railway has turned out as a”worst of both worlds”. The promised private sector innovation, enterprise and investment have been largely prevented by growing governmental control.

    The passenger railway has increased its traffic by 60+% since privatisation but its costs have also escalated, whilst the freight operators have had a sinilar traffic increase with no appreciable cost increase ; it may be relevant that failfreight is run on an open access basis.

    When privatisation started, the passenger franchises were only intended to be minimum service guarantees with the TOC’s free to develop and expand beyond this.

    Personally, I’d like to see all services (eg intercity) where effective competition can give accountability to run on an open access basis. Subsidies / charges could be given / levied as performance – related incentive payments rather than on a fixed – contract basis.

    Other operations ( many commuter, eg) which are natural monopolies would need an alternative approach – perhaps localised consumer cooperatives. with management boards diredtly elected by local communities plus season ticket holders ?

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