FRANCHISING – THINGS AIN’T WHAT THEY USED TO BE!

RAIL passenger franchising was invented in Great Britain, for British Rail’s break up and privatisation, as a means of taking forward passenger services in what two decades ago was thought to be a declining industry.

Since then, passenger services have been anything but in decline, with the network now carrying record numbers, and it is increasingly evident that ‘franchising’, as it was perceived in the 1990s, is incapable of coping with today’s growing and increasingly complex railway.

One of the problems with the original plans for BR’s privatisation was that the privatisers – especially Ministers and their special advisers in John Major’s then government – could not, or did not, understand the interdependencies of the various components of the rail industry.

Sir Richard Branson was among these when he had early plans for ‘cherry picking’ the best services on the East Coast Main Line and talked of his trains overtaking other, slower trains, to keep time and get to Newcastle and Edinburgh quickly.

And the merchant banker advisers were aghast when the train planners at Crewe told them of the complexities of planning timetables for all sorts of different types of passenger and freight trains using the West Coast Main Line, including the interaction with CrossCoutry services at Birmingham and other key centres, such as Reading, Bristol, Sheffield and York.

This was one of the reasons why franchising of WCML services was left until last and why what were seen to be simpler, more self-contained service groups were the early ones to be put on the market.

One of first to be offered to the private sector was the London, Tilbury and Southend franchise, now known as Essex Thameside (currently operated as c2c by National Express).

But no longer, apparently, is this franchise considered to be a simple one – although a colleague of mine who is one of the best rail operating experts still active in the industry describes it as little more than “a long shunt” from Fenchurch Street to Southend.

But, speaking to Railnews Managing Editor Sim Harris last week, the Department for Transport’s acting Franchising Director, Peter Wilkinson, dismissed any suggestion that awarding a new Essex Thameside franchise should be fairly straightforward on the grounds that it is a simple operation largely based on one commuter corridor, with few conflicting movements by other operators.

“Show me a simple railway,” he told Sim Harris, “and I’ll show you a myth.”

Indeed, re-letting the present Essex franchise has become so complex that the Major Projects Authority has rated it as ‘amber/red’ – the same assessment given to HS2 at its early stages – and the DfT has now deferred selecting a new Thameside franchisee until next November.  (Mind you, I haven’t heard HS2’s detractors calling for the Essex operation, with its amber/red rating, to be scrapped, or for details of the Major Projects Authority’s report on why it is rated amber/red to be published!)

Not franchises, but management contracts

WHAT has become increasingly apparent is that Britain’s rail franchises are nothing like normal commercial franchises – such as Burger King or M&S Simply Food outlets that we see at mainline stations – but are actually complex management contracts awarded by the government, which retains overall control.

This is something I have explored in my ‘The Long View’ column for June’s print edition of Railnews – for, it seems to me that when coupled with the decision to make Network Rail a government-owned company from September, with the company then borrowing directly from government funds, the arguments about renationalising Britain’s railway are largely defunct.  By the end of this year all of the railway infrastructure will be publicly owned – and passenger operations will be state-controlled, even if they are managed on a day-to-day basis by private contractors on behalf of the government.

Take the new Thameslink Southern Great Northern (TSGN) franchise, for example.  It is actually a seven-year management contract in which the government will retain all the revenue risk – although it is fair to say that the operator, GoVia, will have to manage a considerable risk of its own in making a success of merging into the largest-ever single passenger operation what 20 years ago comprised three franchises – Thameslink, West Anglia Great Northern (WAGN) and South Central.

The diagrammatic map of the new network looks much like a large egg timer. But trains are going to have to pass through the narrow central section every two-and-a-half minutes – even quicker than it takes to boil an egg – if everything is going to keep to time and not run out of course and interfere with other trains sharing the same principal routes north and south of London!   Among these is the London-Brighton line, which is generally reckoned to be as congested and in need of relief as the West Coast Main Line.

The future of the Great Western franchise looks even more complex, and emphasises the problems of “known unknowns” resulting from major future investment plans – including electrification to Newbury, Oxford, Bristol and South Wales, completion of Crossrail (to Reading now), introduction of electric rolling stock, including 57 Intercity Express trains (and ETCS to replace the ageing BR prototype ATP used on the present IC125s), and integration with HS2 at Old Oak Common.

Most likely outcome would seem to be a “direct award” extending the present contract with First Great Western for up to five years.

A recent consultation document issued by the Department for Transport says its Rail Executive “is now considering options for successor contractual agreements to the current, first direct award which expires in September 2015 in order to best meet the needs of the franchise over a period of significant infrastructure and rolling stock change”.

Which seems to be official-ese for a 5-year management contract with the present operator while £7.5 billion of investment upheaval during Control Period 5 until 2019.

Competition or monopoly?

BUT there are many oddities and quirks about the way franchising has been allowed to develop – notably that on some routes there is an element of competition, while on others the franchisee has a total or near monopoly.

Take Birmingham-London, for example, a corridor with two routes – the Chiltern Line and the West Coast Main Line – and with three operators: Chiltern, London Midland and Virgin and on an ordinary day they operate a total of eight trains an hour between the two cities and offer a variety of fares.

Interestingly, the latest official statistics from the Office of Rail Regulation for travel within and between the British regions in 2012-13, show the West Midlands as the source of the highest passenger growth – a 5.9 per cent increase in journeys to/from London. The ORR also noted that every district/unitary authority within the West Midlands (with the exception of Telford & Wrekin) saw an increase in the number of journeys to/from other Regions compared to 2011-12, “with increases in excess of 5 per cent for Warwickshire and Worcestershire.”

The West Midlands figures compare with growth of only 2.2 per cent in rail passenger numbers between the South East region and London .

And growth in the West Midlands was not confined to journeys to/from London, as there was a 4.5 per cent rise in journeys to/from the North West, including Liverpool and Manchester. Also noteworthy, journeys between Greater Manchester and other regions increased for the eighth successive year, according to the ORR, by 4.4 per cent.

Certainly all this underscores the continuing growth along the principal West Coast corridor, which is one of the main justifications for the first stage of HS2.

But it also begs the question: to what extent has growth been encouraged by the presence of several train operators offering alternative services and competing fares?

For example, whereas Birmingham has a total of eight trains each way every hour on London routes provided by three different operators, Bristol – even after a doubling of services following introduction of the new Intercity Express electric trains in 2017/18 – will only have four an hour each way (two via Bath and two via Bristol Parkway) operated by a single ‘franchisee’.

When ‘franchising’ began in the 1994-97 period, there were separate long-distance and commuter operators using each of the mainline London terminals – Great Western and Thames Trains at Paddington; Virgin and Silverlink (now London Midland) at Euston; Midland Mainline (now East Midlands Trains) and Thameslink (now part of FCC) at St Pancras; GNER (now East Coast) and West Anglia Great Northern (WAGN, now part of FCC) at Kings Cross; and Anglia and Great Eastern (now combined as Abellio Greater Anglia) at Liverpool Street.

Then the Strategic Rail Authority took over from OPRAF (Office of Passenger Rail Franchising) and decided that each London terminal should have only one operator providing all services.

But this idea was only partially implemented – at Paddington and Liverpool Street – before Alistair Darling swept away the SRA and moved control directly into the Department for Transport, and it may well be that passengers at stations along the routes from the Great Western and Great Eastern London termini do not now receive as a good a service or as competitive a range of fares as they might if two franchisees had remained operating.

Certainly, my friends in Reading draw invidious comparisons with their colleagues in Milton Keynes, where there is competition between Virgin and London Midland whereas all services between Reading and Paddington and now operated only by the Great Western franchise – although this will eventually change, in 2019, when the suburban service becomes part of Crossrail and the responsibility of Transport for London.

Interestingly, though, there has been substantial growth in both Berkshire and Buckinghamshire.  The ORR’s figures for 2012-13 record that Milton Keynes had growth of 7.2 per cent in journeys, while Buckinghamshire had its seventh consecutive year of growth, at 7.1 per cent – and West Berkshire clocked up the largest growth, 9.3 per cent.  These figures compare with an overall increase throughout the whole South East region of just 1.8 per cent.

So, despite the vagaries of ‘franchising’ – and whether or not there is competition between ‘franchisees’ – the continuing growth trends support decisions to invest in new capacity in the West Coast corridor (ultimately with HS2, but currently by squeezing extra capacity out of both the West Coast Main Line and the Chiltern route), and pumping £7.5 billion into the Great Western Main Line over the next five years.

3 thoughts on “FRANCHISING – THINGS AIN’T WHAT THEY USED TO BE!

  1. There is more than one operator between London and Bristol, South West Trains run every two hours from Waterloo to Temple Meads, The journey time is about an hour longer but the fares are much cheaper, especially if booked through megabus.

  2. Franchising is a flawed concept. It involves a series of peivate near – monopolies that, in the abscence of competition have to be nade accountable through extensive governmental control, rather denying the whole rationale for privatisation in the first place with innovation and enterprise and associated invertment by TOC’s suppressed.

    Those operations ( most intercity,eg.) where effective competition is feasible, ought to be given over to open – access, whilst natural monopoly services (many commuter eg.) could be accountable to stakeholders via some kind of local direct democracy such as consumer cooperatives.

    In both cases, subsidies could be given where hidden/ wider costs and benefits need representing in the marketplace ,as performance – related incentive payments rather than by fixed contract.

    As for Network Rail, as a natural monopoly, public ownership is probably necessary. Sweden, as the first EU country to institute “Vertical separation” has recently incorporated road, rail and water infrasreucture under one organisation. In the UK we could probably have such a national body to ,manage both main rail lines and Highways Agency roads with local bodies managing local rail lines and roads.

  3. One co-ordinating body might work, but needs to think hard about its priorities. The most infuriating absence from the transport debate (IMO) is the discussion on marginal costs – especially environmental and health etc. It’s all ‘grant here’, or ‘no support here’, largely for the kind of reasons that suit bureaucrats and profit-takers, not the general public.

    Consequently, despite all the cash which has been shovelled at the railway in the last 20 or so years, lorry operators recently got away with a big hike in lorry weights, an entirely arbitrary decision. Meaning houses near main roads will continue to fall apart (only quicker) and HGVs will continue to slaughter cyclists. And rail freight was dealt another blow. All for a bob or two more.

    The best way to reduce the ill-effects of road traffic is neither to build more roads (for nothing), nor is it to tax motorists off the roads; but apportion costs fairly. The current system is the result of the stand-off between the political Left (‘nationalisation at any cost’) and Right (‘concrete over the shires!’). Neither is prepared to take responsibility for the cash they pilfer in taxes to pay for their dreams (though truthfully the roads lobby to date has been by far the worst offender)

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