Rail Pro article: Jury out on Franchising




 

This article appeared in last week's Rail Professional.

 

There have been three major Railway announcements in the past couple of months, and on two of them I believe the government is making absolutely the right choices. British railways are seeing their biggest investment in over 100 years delivering growth and jobs to Manchester and the North.

The first major announcement is on HS2. I have long supported HS2. It deals with the impending capacity crisis on the West Coast Main Line, something that opponents of HS2 don’t seem to address when criticising the plans.

The Government’s announcement of £33bn of investment over 20 years will be good for Manchester and create up to 60,000 new jobs. Some 10,000 jobs during construction, 1,400 permanent operational jobs and over 49,000 jobs in the regeneration and development areas associated with station developments.

There will be two new stations in Manchester, next to Piccadilly and Manchester Airport.

The Liberal Democrats were the first party to commit to high-speed rail. It is a key part of our priority of moving towards a low-carbon economy. Once complete, HS2 will transfer approximately 9 million journeys from road to rail and 4.5 million from air to rail.

 

By shortening train times, HS2 will also make investment and economic interest in regions outside of London and the South-East more attractive. This is vital if we are to help rebalance the UK economy.

The second annoucement were Network rails plans for the next 5 years.

The plan includes over £1 billion of investment for the North West. This investment will create 20,000 jobs and boost investment, returning £4 to the regional economy for every £1 spent.

Local passengers will benefit from shorter journey times and more frequent services. The journey from Manchester to Leeds, for instance, will be cut by 10 minutes.

One of the most telling statistics is that this government has committed to electrifying over 800 miles of track over the next five years, compares to just 10 miles in Labour’s 13 years. Electrifying the North West and North Trans-Pennine lines will spare the environment and cut journey times.

In the long term, this huge modernisation project will reduce running costs and help put an end to runaway increases in train fares.

But we are not doing everything right. The third major announcement was on the future of the franchising system. As a former Transport Select Committee member with a long interest in transport matters, I have long argued for reform.

I believe that a decision should not be made just on price. Past performance and customer satisfaction should be part of the process, which should be transparent and include some independent oversight over the whole process

When Transport Secretary Patrick McLoughlin made an announcement to the House of Commons about Rail Franchising on the East and West Coast Main Lines, I listened with interest.

Both franchises had gone wrong for different reasons.

On the West Coast mainline, Virgin trains got their contract extended to 2017. This followed a protracted saga with First winning the bid from Virgin; Virgin challenging the decision in the courts, the Department for Transport admitting flaws in the process, then Virgin getting an extensions of their contract before this second announcement.

Sam Laidlaw’s Independent report into the process found that Department for Transport officials had supplied Ministers with inaccurate information before the original decision was taken.

The government also accepted Mr Laidlaw’s recommendations that civil servants need a clearer, simpler structure of governance and having someone senior in charge when working on these franchises. The Secretary of State rightly apologised for the department’s mistakes.

The extension of the franchise to Virgin was good news. It ended the uncertainty, and rewarded a company who has a track record on delivering a good service to customers and a decent return to the Exchequer.

The second announcement was that the East Coast mainline would be put back out to franchise.

This doesn’t make sense. I believe that the franchise has not been in the public sector long enough for an independent assessment to be made about the performance, although most assessments seem to think they have provided an excellent service.

In November 2009, when National Express East Coast had its contract terminated, the franchise was taken over by Directly Operated Railways. (DOR)

National Express had agreed to pay £1.3bn under the original franchise, but passenger revenues were hit by the recession. Talks with the DfT about easing the terms of the deal came to nothing.

DOR paid about £600m to the exchequer, much less than Stagecoach promised, but much more than they delivered.

After the Minister’s statement, I asked him,

“By deciding to re-franchise the east coast mainline in the future we risk not being able to judge whether the public sector or private sector is best for the passenger, the tax payer and the railways.  Surely as a minimum we ought to allow Directly Operated Railways to bid to run the franchise?”

He rejected my plea, saying

“That is not the case—Directly Operated Railways is not a company in its own right; it is a company owned by the Department for Transport. We will certainly be able to see how the companies are doing. The process will be open. I have already seen reports, although I have not had it confirmed, that Virgin will put in a bid for the east coast main line, and a lot of people were very happy with the service they received on the west coast main line.

It appears that the Secretary of State is opposing a state-run service on ideological grounds, and not based on evidence. He should be supporting what works best. We could learn from some of our successful neighbours in Europe, like Germany and Holland.

Both have a more devolved decision-making process, which means a more integrated service than the UK.

The biggest railway company in Germany is Deutsche Bahn, which is Germany’s state run railway company, and Arriva’s parent company. German Inter City routes are open to competition, but Deutsche Bahn’s dominance in the market scares off other providers.

So I wouldn’t want a system that gave one public, or private, provider, that kind of dominance in the market.

I am not ideologically wedded, or opposed to Rail franchises. It is clear that in some cases they have delivered. But without a public sector comparator, how can we tell what is the most cost-effective way of providing the rail network of the future?

The jury is still out on whether the franchise system can be transparent, give a good quality service to train users, and minimise the cost to the taxpayer.

 

Share this post on social media: