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Keith Williams suggests government should take a back seat in franchising

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class 9

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It's all very nice, but the biggest issue at the moment is due to the level of pension related risk, very few companies want to take on franchises. The franchise system is broken unless enough organisations actually want to tender
In the early days of privatisation in the late 90s, the TOCs were happy to take pension contribution holidays & pocket the millions! If they’d not been allowed to do that, then the pensions would be in a lot better position now.
 
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thedbdiboy

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Applies to BR too - in the late 1980s and early 1990s they also enjoyed a long pensions holiday and it was just allowed to continue a bit into privatisation. The whole pensions issue has arisen from tax changes starting with Gordon Brown's tax raid in 1997 coupled with the collapse in interest and bond rates which governments don't want to reverse because it lets them borrow on the cheap.
 

class 9

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Applies to BR too - in the late 1980s and early 1990s they also enjoyed a long pensions holiday and it was just allowed to continue a bit into privatisation. The whole pensions issue has arisen from tax changes starting with Gordon Brown's tax raid in 1997 coupled with the collapse in interest and bond rates which governments don't want to reverse because it lets them borrow on the cheap.
I started with BR in 89 & the first pension holiday I had was when MTL took over the former RRNE.
 

didcotdean

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In the 1980s because of the booming stock market many organisations with funded DB pensions largely invested in equities found themselves in significant surplus, at least by the actuarial rules of the time. They were then strongly encouraged into pension holidays by government action as any fund with over a 5% surplus would be taxed as a result of changes in the 1988 Budget.
 

Mag_seven

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Applies to BR too - in the late 1980s and early 1990s they also enjoyed a long pensions holiday and it was just allowed to continue a bit into privatisation. The whole pensions issue has arisen from tax changes starting with Gordon Brown's tax raid in 1997 coupled with the collapse in interest and bond rates which governments don't want to reverse because it lets them borrow on the cheap.

Pension funds have always been seen as rich pickings in time of surplus for both employers and chancellors alike. Then of course when it all goes wrong in time of deficit, they want the employee to accept inferior schemes etc.
 

Matt P

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The simple answer is to look at what works best in other countries. (Hint - it's not privatisation....)

If we were to look how railways are structured/are being structured in Europe then we'd end up with something like this:

A limited company with the government as sole shareholder with wholly (or perhaps partly) owned subsidiary but separate infrastructure and operating companies (e.g Germany). The alternative would be for infrastructure to be a statutory agency and operations being a Ltd company, again with the government as sole shareholder (Netherlands, Sweden).

Long distance and freight would be operated on a commercial basis with the state owned company operating alongside and competing with open access passenger and private freight operators. Regional and local services would be specified and funded by local or regional transport authorities and tendered on a competitive basis, with contracts being awarded to the national operator and others (I understand non-DB operators have around 40% of regional market in Germany now).

Unlike our regional sized franchises PSO contracts in many European countries seem to be awarded to operators on a line by line basis or by bundles of two or three lines, meaning a regional transport authorities will award to two or more opertors at the same time.
 

Class 170101

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I disagree. NR needs to concentrate one infrastructure, and some independent body needs to orchestrate, because the optimal solution for the railway as a whole is not necessarily the most expedient for NR.

And this is what concerns me if NR are allowed to control the railway in this way. Later trains will depart earlier and early trains will be forced to leave later to allow more access for engineers and nevermind the passengers. Just look at the last train from St Pancras to Derby and Nottingham. Was 23:40 around 5 years ago and now its around 23:10.
 

Carlisle

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When I think back to the original Virgin West Coast franchise and Virgin XC franchises, it was my perception that the TOC had a greater control in terms of branding, bringing in new trains that they specified rather than the DFT, .
True, if I remember correctly SWT & FNW didn’t agree new trains before they won their respective bids but decided at a later date to procure the 458s & 175s. That type of freedom seems long gone, it’s now all agreed with DFT or devolved equivalent before a winning bid is announced, with virtually no discretion to make further changes until the next award, be that a new operator or extension of an existing agreement
 
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hooverboy

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Another issue (is it an issue?) with the current setup is that improvements seem to come thick and fast during the first five years of a franchise (with 1 year being just settling in ) but the last two years seem to slow down to very little investment or ongoing organic progression. Franchise holders seem to sort of go into coasting mode and then might have a further 1 year extension after that or whatever just running as is.

Why can't further improvements be 'agreed' on a progressive ongoing basis even after the initial obligations are complete?


I'd agree that franchise periods are too short.
I'd also suggest that ROSCO's stock portfolio should be tiered, with rates reduced according to age.

you could combine that with the length of franchise.....
if you take 40 years as maximum age of stock(ideally 30), then that would equate to 4(or 3) 10-year long tiers.

as for the erratic nature of franchise plans, then the TOC contract should stipulate promise x as:
"to be completed by end of lease period"
 

hooverboy

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And this is what concerns me if NR are allowed to control the railway in this way. Later trains will depart earlier and early trains will be forced to leave later to allow more access for engineers and nevermind the passengers. Just look at the last train from St Pancras to Derby and Nottingham. Was 23:40 around 5 years ago and now its around 23:10.
perhaps they should do less, better.

They have mountains of engineering backlog, and are embarking on HS2 already?
I would say it would be better to complete the present projects on time/ahead of time

having said that, there are areas where MORE central control is needed...ie the signalling/telecoms interoperability vis-a-vis crossrail.
the equipment in question from all suppliers should be tested and qualified to recognised specifications before being sent into the field...as 3gpp is for mobile telephones.
 

pt_mad

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True, if I remember correctly SWT & FNW didn’t agree new trains before they won their respective bids but decided at a later date to procure the 458s & 175s. That type of freedom seems long gone, it’s now all agreed with DFT or devolved equivalent before a winning bid is announced.
In many ways to me it kind of feels partially nationalised to some degree anyway. I hear so many leisure travellers say 'oh..., only 2 carriages (example), terrible, they know it's busy why don't they put more carriages on'. It seems many casual travelers believe the operators are in full control of the amount of stock they can lease and can pick up extra stock if and when they need it casually.
I've seen a few times on Twitter an operator having to explain that sorry, all available stock is out today and there aren't any spare trains parked up in the sidings.
 

HH

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There are two other aspects to the Rolling Stock story - DfT procurement of Rolling Stock (700s, 800s), which hasn't been a great success, and the fact that arguably DfT evaluates new Rolling Stock too highly in deciding who wins franchises (hence why Abellio has been so successful).
 

matt_world2004

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Bit ironic if the government implement this considering they promised a bonfire of the quangos
 

The Ham

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Sounds like the SRA is on its way back. But as long as the railway requires billions of taxpayers money Government will always remain heavily involved.

Of the NET subsidy (£6.4bn) for the railways it generally is broken down as follows:
- £2.088 billion HS2
- £4.199 billion for Network Rail (of which £4.1 million is for enhancements)
- £0.302 billion listed as other (including PTE grants)
- this is then offset by payments from the TOC's to the tune of £0.233 billion

If we exclude HS2 and the rail enhancements (which shouldn't be included in looking at the subsidy for the TOC's) then the day to day costs of running the railways to the government is about £281 million (depending on the rounding for the £6.4 billion).

As such there's an argument that the TOC's could be given a reasonable amount of flexibility as they don't receive very much in the way if subsidy.
 

Deltic1961

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Pertty sure SNP pledged to renationalise Scotrail around 2011. Never happened and now we have Abellio making a **** of it. Happy days.
 

whoosh

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And this is what concerns me if NR are allowed to control the railway in this way. Later trains will depart earlier and early trains will be forced to leave later to allow more access for engineers and nevermind the passengers. Just look at the last train from St Pancras to Derby and Nottingham. Was 23:40 around 5 years ago and now its around 23:10.

I'd say it was at least 10 years ago. Also introduced at the same time is a later service to Leicester at 00:15 (which then runs empty to Derby!).
 

Class 170101

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Pertty sure SNP pledged to renationalise Scotrail around 2011. Never happened and now we have Abellio making a **** of it. Happy days.

But are Scottish Government allowed to re-nationalise? I thought that power had been reserved to Westminster?
 

Class 170101

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I'd say it was at least 10 years ago. Also introduced at the same time is a later service to Leicester at 00:15 (which then runs empty to Derby!).

The 00:15 is more recent than the earlier departure of the former 23:40 to Nottingham and Derby.
 

krus_aragon

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Pertty sure SNP pledged to renationalise Scotrail around 2011. Never happened and now we have Abellio making a **** of it. Happy days.
But are Scottish Government allowed to re-nationalise? I thought that power had been reserved to Westminster?
At a similar time, the Welsh Government were making loud noises about a not-for-profit franchise the next time round. Their legal position was very different to that of Scotland, but Westminster gave a "no way" response.
 

LNW-GW Joint

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Scotland has the power to award the Scotrail franchise to a public body, but chose not to.
Wales now has somewhat similar powers but chose not to use them in the award to Keolis (the franchising process was different to the DfT's, however).
There has to be an open competition though.
You can't just award an unlimited monopoly to your in-house team, which seems to be what John McDonnell was proposing today for local government services.
 

krus_aragon

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Scotland has the power to award the Scotrail franchise to a public body, but chose not to.
Wales now has somewhat similar powers but chose not to use them in the award to Keolis (the franchising process was different to the DfT's, however).
There has to be an open competition though.
You can't just award an unlimited monopoly to your in-house team, which seems to be what John McDonnell was proposing today for local government services.
I seem to recall Westminster making a fuss about how it felt the cross-border and England-only stuff should be run, and not being happy with the WG's initial aspirations. But that's water under the bridge now, and we've got the outcome of this review to look forward to.
 

Andrew1395

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Applies to BR too - in the late 1980s and early 1990s they also enjoyed a long pensions holiday and it was just allowed to continue a bit into privatisation. The whole pensions issue has arisen from tax changes starting with Gordon Brown's tax raid in 1997 coupled with the collapse in interest and bond rates which governments don't want to reverse because it lets them borrow on the cheap.
BR only took a pensions holiday when the scheme was in surplus and the Thatcher government threatened to take the surplus. The BRB took a holiday, but employees contributions also fell and BRASS2 was introduced so that employees could get bigger pensions by investing that contribution saving in an AVC plan. BR also matching that BRASS2 saving. In my case in 1987 I saved £10 a week and the board also put in £10. I think those actions are not comparable to private sector companies cutting payments to their sections of RP. two other factors are of course the massive increase in pensionable pay with the consolidation of nonpensionable allowances. The other is the actuary view on longevity. In 1994 they expectation was the average BR retiree died by 73, now the estimate is nearer 83.
 
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pt_mad

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Scotland has the power to award the Scotrail franchise to a public body, but chose not to.
Wales now has somewhat similar powers but chose not to use them in the award to Keolis (the franchising process was different to the DfT's, however).
There has to be an open competition though.
You can't just award an unlimited monopoly to your in-house team, which seems to be what John McDonnell was proposing today for local government services.
Could it have been that a public bidder could not have competed on the figures?
 

Carlisle

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Could it have been that a public bidder could not have competed on the figures?
Maybe the significant cost & time involved in actually mounting a public sector bid was a contributing factor, given its not operated UK mainline Passenger rail in a major way for about 25 years
 
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LNW-GW Joint

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Maybe the significant cost & time involved in actually mounting a public sector bid was a contributing factor, given its not operated UK mainline Passenger rail in a major way for about 25 years

I think the public body under consideration in Scotland was ferry operator Caledonian MacBrayne (owned by SG).
However it didn't have a rail franchise "passport" or any specific qualifications to run a rail operation.
The other issues are how it would raise finance to make the guarantees that the process demands, and how its owner (SG) would be neutral in its consideration of competing bids.
And as you say, finding the resources to make the bid at a cost to the taxpayer.
 

Wilts Wanderer

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In 1994 they expectation was the average BR retiree died by 73, now the estimate is nearer 83.

I find that astonishing - I didn't think the average lifespan had gone up by THAT much during my lifetime? (I was 8 in 1994.)
 

krus_aragon

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I find that astonishing - I didn't think the average lifespan had gone up by THAT much during my lifetime? (I was 8 in 1994.)
Perhaps the average was being kept low by people who'd spent a portion of their working lives on the footplate of a steam engine, or doing similarly dirty jobs.
 

hooverboy

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I find that astonishing - I didn't think the average lifespan had gone up by THAT much during my lifetime? (I was 8 in 1994.)
'tis true.

that's why most people in the private sector now have to retire at 67 instead of 65.

ps if you were 8 in 1994, then I've got some really bad news. YOUR retirement age will most likely be 70.
 

Wilts Wanderer

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'tis true.

that's why most people in the private sector now have to retire at 67 instead of 65.

ps if you were 8 in 1994, then I've got some really bad news. YOUR retirement age will most likely be 70.

That’s not a surprise, I’ve got a 30 year mortgage.
 
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