Transition from Franchises/ERMAs to Concessions

[LNW-GW Joint]

Two articles have appeared in Railway Gazette which describe the transition arrangements for the majority of DfT franchise/ERMA contracts to new direct awards based on the concession model.

In the first, there a timetable for each current DfT TOC (not those devolved or under local government control), with direct award start dates through 2021-22 and durations of 4-6 years (with possible extensions).
Top of the list, and with the shortest direct award durations, are the franchises currently in the most difficult financial position (TPE, SWR, c2c), all due to start April 2021 and last 4 years.
At the bottom, West Coast Partnership (Avanti) is set to start in April 2022 and will last 6 (+2) years.
GWR and XC are also excluded from the list as they already have direct award contracts extending to 2022 or beyond.

DfT prepares ground for direct awards

UK: The Department for Transport has started preparations for the future of 10 English rail franchises with the publication of an OJEU Prior Information Notice on November 6 setting out its plans to directly award new public service contracts. The PIN covers train operations that are not ...

www.railwaygazette.com

The OJEU PIN sets out a timetable for the proposed direct award contracts, which vary in length to allow a staggered transfer to new concession agreements in line with the Williams Review proposals. Each contract would include an optional extension at the discretion of the Secretary of State for Transport, meaning that the proposed durations could range from 18 months to six years.

Table from RG article:

Franchise	Direct award start date	Maximum duration	Core period*	Optional extension
TransPennine Express	01/04/21	48 months	2 years	Up to 2 years
South Western Railway	01/04/21	48 months	2 years	Up to 2 years
Essex Thameside (c2c)	01/04/21	48 months	2 years	Up to 2 years
West Midlands Trains	19/09/21	60 months	3 years	Up to 2 years
Greater Anglia	19/09/21	60 months	3 years	Up to 2 years
Thameslink, Southern & Great Northern	19/09/21	72 months	2 years	Up to 4 years
Southeastern	17/10/21	72 months	2 years	Up to 4 years
Chiltern	31/12/21	72 months	18 months	Up to 4·5 years
East Midlands Railway	01/04/22	72 months	4 years	Up to 2 years
West Coast Partnership	01/04/22	72 months	4 years	Up to 2 years
* In each case the Prior Information Notice indicates that the length of the core period is ‘likely’ and that the extension length represents ‘an optional additional period or periods exercisable at the sole discretion of the contracting authority’.

The second piece describes the situation developing between the TOC owning groups and DfT concerning the termination settlement for their current franchise/ERMA contract.
It looks to be getting fraught, and the completion date (franchise termination and new direct award) has been put back to 22 January.

Franchise termination negotiations in turmoil

UK: Passenger franchise owning groups are reportedly considering legal options including judicial review over the process being followed by the Department for Transport for termination of their existing franchise agreements and the transition to directly awarded contracts.

www.railwaygazette.com

Passenger franchise owning groups are reportedly considering legal options including judicial review over the process being followed by the Department for Transport for termination of their existing franchise agreements and the transition to directly awarded contracts.
Discussions between DfT and the various owning groups are likely to continue until mid-January, even though the department had previously set December 14 as the date by which agreement must be reached. Otherwise, the Secretary of State may terminate the Emergency Recovery Measures Agreements under which most services are now operating. This would see the affected franchises revert automatically to the previous financial terms, posing a near certainty of financial collapse as a result of reduced ridership during the coronavirus pandemic.

It remains to be seen how many owning groups will be prepared to take on new direct awards after settling with the DfT for their current franchises.
First Group looks to be in the thick of this, with TPE/SWR being terminated but West Coast getting a new 6-year award extending to 2028-30.
DfT's OLR stands ready to take on TOCs whose current owners walk away.

After all this is implemented, the new concessions will have to fit into whatever industry structure the government decides (the "guiding mind" post-Williams).
The remaining franchises/ERMAs/concessions will also have to be folded into the new structure somehow.

 

[Doomotron]

I assume the transport secretary is sitting at his desk, figuring out how to give Govia the Southeastern concession again.

 

[WatcherZero]

The DfT has reportedly been trying to shaft them by adding charges against their franchise deposits without explaining what those charges are.

 

[Class 170101]

Interesting Harris told the Transport Select Committee on Wednesday (see https://parliamentlive.tv/Event/Index/6269b749-a5dc-4f06-9003-f41bdf6e2f4b - second half) that the DfT wouldn't have been able to run all as OLR had the owning groups walked away in March / April. Is there any confidence that OLR could run them all come January if it needed to?

 

[Nicholas Lewis]

Interesting Harris told the Transport Select Committee on Wednesday (see https://parliamentlive.tv/Event/Index/6269b749-a5dc-4f06-9003-f41bdf6e2f4b - second half) that the DfT wouldn't have been able to run all as OLR had the owning groups walked away in March / April. Is there any confidence that OLR could run them all come January if it needed to?

Yeah i clocked that comment although with the way the govt have slung money at the Covid situation over PPE perhaps we shouldn't be surprised that they want to keep the TOCs in the game. First Group MD was a bit rankled over the termination arrangements but ultimately its clear govt are intent on whatever replaces the franchises being operated the private sector so i doubt there will be any major falling ut and it will be subject t commercial confidentially so we will never really know.

 

[LNW-GW Joint]

Yeah i clocked that comment although with the way the govt have slung money at the Covid situation over PPE perhaps we shouldn't be surprised that they want to keep the TOCs in the game. First Group MD was a bit rankled over the termination arrangements but ultimately its clear govt are intent on whatever replaces the franchises being operated the private sector so i doubt there will be any major falling ut and it will be subject t commercial confidentially so we will never really know.

I think part of it is that to eliminate the private sector, even if they wanted to do it, would need primary legislation which isn't realistic at the moment.
They are going as far as they can within the current legislation, while still trying to work out how to restructure the wider industry.
It all has a "plus ça change" feel about it though.

 

[Mrwerdna1]

Am I right in thinking that if indeed franchises are dead and the DfT will in the long-run move towards a concession based model, we won't get livery/name changes every 5 years? I could definitely get used to that to be honest. I've always preferred the livery & name "continuity" of long-running franchises (such as Southern, Scotrail) or concession-based operations (Tfl rail, London Overground, Metrolink etc.).

That being said, I'll be interested to see how a concession based model would work on a national scale. Though Tfl Rail, Merseyrail and Metrolink all appear to offer both better service and greater reliability than most franchises, their network size and complexity is hardly comparable to most major national rail franchises today (especially ones as complex as Great Western or West Coast).

Does anyone think they might split up or rearrange the area that the current franchises cover (i.e. break regional services down into smaller chunks that could be partially run by local authorities). It's certainly what some officials such as Andy Burnham have been calling for for years (not saying that it's a good idea necessarily). In that scenario, TfGM (or a conglomerate of county authorities) would regulate the operation of most local services in the area (and award concession contracts), while the DfT would regulate long-distance intercity services in and out of the Greater Manchester area, just to name one example here.

Moderator note: any further speculation belongs in the following thread: https://www.railforums.co.uk/thread...ncessions-and-brandings-going-forward.213674/ thanks!

 

[Goldfish62]

I'm sure today was the deadline by the remaining in-scope franchisees had to agree to the DfT's terms to convert to management contracts. All I'm aware of that have been agreed so far are SWR and Avanti.

If you look at liveries in countries where the railways are "nationalised", you see almost as much variety at in the "privatised" UK.
France and Germany plaster their trains with local/regional crests and icons, and Italy puts abstract designs on them (matching the local train brands like "Jazz").
They are also busy inventing sub-brands with totally different imagery and marketing to the old monolithic national corporate styles.

Yes, and then there's the vast numbers of private operators, particularly in Germany, each with their own liveries.

 

[LNW-GW Joint]

I'm sure today was the deadline by the remaining in-scope franchisees had to agree to the DfT's terms to convert to management contracts. All I'm aware of that have been agreed so far are SWR and TPE.

Wasn't that for SWR and Avanti?
I wasn't aware of a settlement for TPE.

 

[Goldfish62]

Wasn't that for SWR and Avanti?
I wasn't aware of a settlement for TPE.

My mistake! Yes, Avanti not TPE!

 

[387star]

According to The Telegraph there will be an imposed pay freeze on rail workers for up to two years with pay rises only agreed for 'exceptional reasons ' to help balance the books

 

[Nicholas Lewis]

According to The Telegraph there will be an imposed pay freeze on rail workers for up to two years with pay rises only agreed for 'exceptional reasons ' to help balance the books

If that protect jobs the unions should be supportive.

In aviation Easyjet wanted to get rid of half its pilots but BALPA, the pilots union, proposed putting pilots on reduced pay the members voted overwhelming for it and the majority of jobs have been protected.

Trouble is railway unions don't think that way although much is down to history I appreciate but railway drivers are well remunerated now so should be onboard but RMT likely not and Cortes at TSSA has been spoiling for fight for sometime with NR.

 

[lordbusiness]

Putting people on reduced pay and a pay freeze are slightly different.

 

[Bletchleyite]

Putting people on reduced pay and a pay freeze are slightly different.

They're both means of paying them less over a period of time. Personally I'd rather a pay freeze than a reduction, as it doesn't mess up personal finances quite as immediately.

I suspect very few people in the private sector will receive pay rises this year.

 

[GRALISTAIR]

Personally I'd rather a pay freeze than a reduction, as it doesn't mess up personal finances quite as immediately.

I totally agree.

 

[lordbusiness]

A pay freeze- no pay rise for 2 years, would only save maybe 2-3% pa from the wage bill. Whereas a pay cut would probably be more.
Also take into account that inflation will make your salary now buy less in 2 years time, also factor in that it will affect pension pots in the longer term as you will be paying in less (and the employers contribution will be lower).
Therefore, assuming a 2.5% annual pay rise over two years- 5%, plus annual inflation you are basically looking at about a 10% paycut after 2 years.

 

[Geeves]

Even if the RMT put out a ballot I think it would be overwhelmingly voted down by members on the ground. You don't need to be a genius to see hundreds of empty trains are not going to be paying their way.

Being an RMT member I would prefer the eye of Sauron not to be brought onto us thankyou!

 

[irish_rail]

Pay cut would be completely unpalatable. I cant see the Dft going down that road. However a pay freeze I personally would support , provided grades such as cleaners continue to get a rise due to their increased importance and workload at the present time.

 

[Kremlin Stooge]

Many of those who advocate for “public control” of public transport overlook (perhaps conveniently) that such a move brings the workforce into the purview of a Treasury-backed public sector pay policy regime.

So, do people want to work in a market where their wages are set by a supply of suitably qualified/experienced/talented workers vs demand for such people, or work in a ‘market’ where the wages are set by an unaccountable clique of civil servants/bureaucrats?

As the saying goes, be careful what you wish for...

 

[lordbusiness]

Most of the public sector have been on a pay freeze aka pay cut for years, any protestations aren't likely to find much sympathy.

 

[Class 170101]

According to The Telegraph there will be an imposed pay freeze on rail workers for up to two years with pay rises only agreed for 'exceptional reasons ' to help balance the books

Anyone seen the full article that can post it here - its behind a paywall.

 

[fishwomp]

Staff costs seem to be around 30-35% of the cost of the railway (this month's editorial of Modern Railways has TOC staff at £3.6B alone). Given the usage drop, the frequency drop, and that fixed cost of many rolling stock contracts... a pay freeze, maybe recruitment freeze also, will only make a small dent - there may be calls for much more change.

Anyone seen the full article that can post it here - its behind a paywall.

Well, copyright would say _no_ don't do that.. I've seen the article, it pretty much says what the headline says, with a few quotes from ministers and MPs.

It also says the termination/ERMAs are dragging out to March..

 

[scotraildriver]

UK rail union threatens industrial action if pay is frozen for two years

RMT leader Mick Cash furious after all 22 rail operating companies told there is no money to raise wages

amp.theguardian.com

The UK’s best-known rail union has said it will have “no hesitation” in supporting industrial action if ministers press ahead with reported plans for a two-year pay freeze for rail workers.
Transport minister Chris Heaton-Harris is understood to have written to the bosses of the UK’s 22 passenger rail companies warning that there is no budget to increase wages for their 62,000 workers.
In the letter he said the subsidies being pumped into the industry were “not sustainable”. Passenger numbers have fallen to around 15% of what would normally be expected, causing a huge drop in revenues.

 

[Djgr]

Many of those who advocate for “public control” of public transport overlook (perhaps conveniently) that such a move brings the workforce into the purview of a Treasury-backed public sector pay policy regime.

So, do people want to work in a market where their wages are set by a supply of suitably qualified/experienced/talented workers vs demand for such people, or work in a ‘market’ where the wages are set by an unaccountable clique of civil servants/bureaucrats?

As the saying goes, be careful what you wish for...

Well I would point out that unless train services return to some form of normality there is going to be a massive oversupply of rail workers, talented or otherwise. And applying the simple rule of market supply and demand there are only two private sector outcomes-one relates to job cuts and the other wage cuts.

 

[fishwomp]

Well I would point out that unless train services return to some form of normality there is going to be a massive oversupply of rail workers, talented or otherwise. And applying the simple rule of market supply and demand there are only two private sector outcomes-one relates to job cuts and the other wage cuts.

If there's over-supply, you get both outcomes at the same time: job cuts and wage cuts. Fewer jobs chased by more people qualified to do it means less pay.

 

[Bald Rick]

A pay freeze- no pay rise for 2 years, would only save maybe 2-3% pa from the wage bill. Whereas a pay cut would probably be more.
Also take into account that inflation will make your salary now buy less in 2 years time, also factor in that it will affect pension pots in the longer term as you will be paying in less (and the employers contribution will be lower).
Therefore, assuming a 2.5% annual pay rise over two years- 5%, plus annual inflation you are basically looking at about a 10% paycut after 2 years.

Your maths is awful, I’m afraid. You have double counted, applied spurious numbers, and used injudicious language.

A pay freeze means exactly that - no pay increase. It’s not a pay cut. If you were expecting an inflationary pay increase, you lose that increase, nothing more. CPI is currently 0.8%; RPI is 1.2%. Using the higher figure, and assuming that it was the same next year, if you had a pay freeze you would earn exactly the same (I.e. not a pay cut), but it would have 2.41% less buying power in 2023 - not 10% or anywhere near it.

Now I don’t know about you but I would be thankful to have 2.41% less buying power next year, if the alternative is not having a job. I say that as someone who has taken a 25% hit on income last year and next; I’m thankful to be in a job.

The RMT need to think very carefully about their next steps here, as the public will have little sympathy for them as the unemployment rate rises. If there is going to be industrial action about this, Government could no doubt choose to make savings in other ways without incurring any more pain.

 

[LNW-GW Joint]

While the union focus is on the nominally privately managed TOCs (bar the OLR-run ones), presumably pay constraints can be forced on the other half of the industry (publicly owned Network Rail) more directly.
I would imagine a lot will depend on whether there are job guarantees to go with it.
Open Access and freight companies, and the Roscos, are fully private so can't be told what to do by the DfT - but they won't get government support either.

 

[Nicholas Lewis]

Many of those who advocate for “public control” of public transport overlook (perhaps conveniently) that such a move brings the workforce into the purview of a Treasury-backed public sector pay policy regime.

So, do people want to work in a market where their wages are set by a supply of suitably qualified/experienced/talented workers vs demand for such people, or work in a ‘market’ where the wages are set by an unaccountable clique of civil servants/bureaucrats?

As the saying goes, be careful what you wish for...

Trouble is if the TOCs had been cast out the market would haven drive down the rates in the current environment at least in state control with strategic policy all at sea the industry will just bumble along with current level of employment for some time unless the treasury leans on them the DofT.

 

[yorkie]

To avoid duplication of discussion, I'll just point out the existence of the following threads:

• RMT on the possible 2 year pay freeze
• What changes could be made to franchises, concessions, and brandings going forward?

 

[Kremlin Stooge]

Well I would point out that unless train services return to some form of normality there is going to be a massive oversupply of rail workers, talented or otherwise. And applying the simple rule of market supply and demand there are only two private sector outcomes-one relates to job cuts and the other wage cuts.

I agree with you that market forces are the best way for “price discovery” in all arenas. Your point could equally read

Well I would point out that unless the nation return to some form of normality there is going to be a massive oversupply of workers

which has rather wider implications.