Branson: Let me invest in railways

[Metroland]

SIR RICHARD BRANSON is urging ministers to hand the private sector a greater role in the railways by giving entrepreneurs freedom to invest in new trains, stations and track.

The Virgin boss said the tightness of the public purse means that without private money, the network risks stagnation.

“With the strains on public finances increasing, I believe the private sector will be crucial in driving rail investment over the next 20 years,” he said.

Branson wants longer train-operating franchises – 15 or 20 years rather than seven – freedom to buy new trains, and the right to fund and build stations and sections of track.

His ideas hark back to the franchising envisaged by the late Sir Alastair Morton, who as chairman of the Strategic Rail Authority a decade ago invited train companies to come up with long-term investment plans, saying he would not impose a “Stalinist blueprint”.

Morton’s approach was abandoned after the collapse of Railtrack in 2001, and the scrapping of the authority. The Department for Transport has since exerted more direct control over the network, including specifying timetables and the choice of rolling stock.

“We are running 21st-cen-tury trains through crumbling 19th-century stations and along track still in need of upgrading,” Branson said.

“We need private vision and investment to take on the challenges that taxpayers are unable and unwilling to fund. Government must not strangle this investment potential by having limited, short-term contracts that stifle innovation.” He will expand on this theme at a function on Tuesday to mark the completion of the £9 billion West Coast Main Line upgrade, which has roughly doubled capacity on tracks linking London to Birmingham, Manchester and Glasgow.

Managers at Branson’s Virgin Rail, a joint venture with Stagecoach that runs services on the west coast, fear that without further investment the route will run out of capacity in 2015-16.

Virgin risks losing the west coast in 2012 when a new franchise will be awarded. A Virgin Rail executive said: “If it is let under the current regime, as a short-term deal where [the size of] payments to the taxpayer is the chief criterion in choosing the winner, it will simply be run for the next seven years with the current timetable and no extra investment.”

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6301701.ece

 

[Pumbaa]

This is why I like Branson - he talks sense!

Despise Beardie Rail as much as you like, having his face on the business works wonders. I agree with virtually everything he says, and whilst disliking the branding Beardie Rail does, I do hope he is awarded with a longer contract in 2012.

 

[The Planner]

I honestly reckon Branston Pickle will lose it in 2012, unless he comes in with a mind blowing sum of money then I think the DfT will take it off him. Interesting about the capacity though, seeing as the next major tweak to the west coast timetable is likely to be 2014.

 

[djw1981]

I also feel that his history with Management contracts, protectionist clauses, and finally renegotiating his premium payments into a subsidy make his claims of investment laughable. He had a 15? year contract so far and has invested very little.

 

[me123]

I've been saying this for a while; longer franchising will stimulate investment. To hear it come out of Richard Branson is fantastic. I do hope the DFT listen to at least that part of this; it makes a great deal of sense.

As for the rest, I do not think that a Labour government will promote any further privatisation of the railways. However, we look set to have a Conservative government but the time Virgin's contract will be up. Whoever's in power, hopefully they'll see the sense in this argument. The railways aren't doing badly in their privatised state, so allowing this further step could free up a lot of money to go to other worthwhile causes, such as health, education, toilet seats...

 

[djw1981]

Any further privatisation? Other than the ORR it is all private!

Adrian Shooter and the Chiltern people have done wonders with their 20yr franchise. Sadly Shooter is no longer chair of ATOC and his sensible voice is less heard.

 

[O L Leigh]

Having a longer franchise is certainly a key factor in Chiltern's success. I would like to think that such a far-sighted approach could have been taken with all the franchises, with the proviso that a poorly performing franchisee could have their contract terminated early.

I have the feeling that Beardy Branston is talking mostly about investment in infrastructure rather than in anything else, but he is running an enormous risk by doing so. An investment is only worth making if there is likely to be a return on it. Ploughing millions into the WCML will be good for rail as a whole, but it won't do Branston much good unless he retains the WCML franchise. Instead, the benefit will accrue to the new franchisee.

The real problem is that private investment in the infrastructure won't work under the current system of rail franchising and operation. If we had the same situation that existed prior to nationalisation I could see the benefit, but the railways have moved on since then. All the TOC's are now are Government contractors with a short-term contract to provide certain services and a limited remit to make improvements and innovations.

This is really just a veiled way of saying to the Government that he wants and expects further upgrades to his routes in order to deliver greater benefits. He won't put his hand in his pocket unless he absolutely has to, but he is flagging up early where he will be laying the blame when he can't deliver the kinds of improvements that he wants in order the keep the tills ringing. This is not Branston the Railwayman but Branston the Politician.

O L Leigh

 

[bluenoxid]

Poor lad, he is in a pickle. I am sure common sense will come back soon

 

[thelem]

with the proviso that a poorly performing franchisee could have their contract terminated early.

I agree with most of your post, but I don't think this restriction would be workable. If the point of longer franchises is to encourage morea private investment, then you need to guarentee to the operator that they will have the contract for the full period.

For example, lets say a new operator wanted a 20-year franchise, and were willing to invest £200m on infrastructure at the start of the franchise (all delivered instantly, for simplicity), on the basis that this investment would earn them £15m more per year, an extra profit of £5m per year over the 20 year term.

But what happens if the contract is pulled from them after 2 years? They would only have recouped £30m of their £200m investment. That's a risk companies (or loan providers) will want to avoid.

 

[me123]

Any further privatisation? Other than the ORR it is all private!

Apologies; I meant that the franchise would take more power from the government and less money from the taxpayer. I still don't think that a labour government would explicitly support that, though.

Having a longer franchise is certainly a key factor in Chiltern's success. I would like to think that such a far-sighted approach could have been taken with all the franchises, with the proviso that a poorly performing franchisee could have their contract terminated early.

That's needed. As has been mentioned, it could act as a deterrent, but it would be necessary to stop a company running a train company for 30 years without doing anything. Maybe what would be a better idea is a clause in the contract stating that they must invest as part of the franchise; similar to NXEC who must introduce the ICEP train. In reality, I think the early-termination clause would be that they can't let punctuality standards drop or something similar. Whatever it was, it would need to show consistently poor performance over a period of time.

 

[asylumxl]

Many of you have recently said that privatisation of the rail companies helped boost investment and increase capacity.

Now, I'm somewhat ignorant about the whole system, but I would assume the government (eg tax payers ) currently control investment in the lines. If not, then disregard everything I say. Surely if a company is willing to invest even at a risk, this can only be a good thing for rail travelers.

Why do they not just stagger investment? Make each franchise winner invest a certain out of money in infrastructure over the term of their contract. That way the risk to businesses is reduced.

 

[O L Leigh]

I agree with most of your post, but I don't think this restriction would be workable. If the point of longer franchises is to encourage morea private investment, then you need to guarentee to the operator that they will have the contract for the full period.

I can understand your concern.

The problem is that you cannot allow a franchisee to just sit on a franchise for 20 years taking the money while everything crumbles around them. There have to be performance clauses in the contract to reward good performance and punish bad, as is standard business practice. How this works and what performance measures are used would need to be decided upon, but the principle should be there. I guess you could allow periods of poor performance if the franchisee was taking steps to address the problem (e.g. through investment in recruitment, rolling stock or infrastructure), but it should not be acceptable for a franchisee to accept this as the norm and take no action.

O L Leigh

 

[Daimler]

While I agree that longer-term franchises are the way forward - Chiltern has already been cited to prove this, I wouldn't let Branson near another railway. His company's laughably expensive turn-up-and-go-fares, trains designed with no thought whatsoever for passenger comfort, and seeming obsession with a 'regular' timetable (many say this is a good idea, but when every train to every destination has exactly the same stopping pattern, getting from one station to another on the same line often requires a change - why not have some variation in order to enable direct trains?) irk me far too much for that.

 

[The Planner]

and seeming obsession with a 'regular' timetable (many say this is a good idea, but when every train to every destination has exactly the same stopping pattern, getting from one station to another on the same line often requires a change - why not have some variation in order to enable direct trains?) irk me far too much for that.

Get used to that, every TOC is trying to do it.

 

[Metroland]

I think Branson is right, we need longer franchises that are willing to risk their own capital for long term investment. We also need less micro-management from the DfT.

As I said in another post, nationalisation would be a fine thing if transport wasn't seen at the bottom of the pile for investment and it wasn't so politicized. It works in Switzerland or France, but it just doesn't seem to work here.

Look at the fuss over the Manchester congestion charge- Examining at the figures last night the modal share of travel into Manchester city centre was 9% for bus, 33% for car and 58% for rail/tram. Yet, people did not want to see money raised from the public purse for public transport even though that was for the majority. The same goes for the Nottingham Tram extension which the Tories are trying to scrap, despite evidence for big modal shift solving congestion and regeneration.

 

[Daimler]

Get used to that, every TOC is trying to do it.

Hmm...Is there any particular operational reason - I can't think of one, but I suppose there must be...

 

[Mojo]

Well I think one problem is the lack of clockface timetables and uneven spacing of trains. Take EMD to STP, during the day it has 2tph to St Pancras; "great," you may think, until you see that they are within 10 minutes of each other.

I personally think the WCML timetable isn't too bad, especially on the Birmingham line. During the day they all call at International and Coventry, with 1 calling Rugby, 1 at Milton Keynes and 1 at Watford. This means that the journey times are (roughly) consistent with variations by only a few minutes, and that those three stations have an hourly service to Birmingham. Someone going from (say) Rugby to Milton Keynes can use alternative services.

 

[tbtc]

SIR RICHARD BRANSON is urging ministers to hand the private sector a greater role in the railways by giving entrepreneurs freedom to invest in new trains

Is there anything stopping Virgin or any other TOC buying new trains?

You could certainly argue that their shorter franchise terms mean it's not cost effective to buy new trains, and that longer franchises will encourage more new trains (though Arriva Trains Wales have a fifteen year franchise IIRC and don't seem to plan on any new trains...).

Longer franchises are fine by me, as long as we don't end up with a basket case (Connex etc). Chiltern have certainly worked, but I think that they've been helped by having sensible backers and a good franchise to run.
--- old post above --- --- new post below ---

I personally think the WCML timetable isn't too bad, especially on the Birmingham line. During the day they all call at International and Coventry, with 1 calling Rugby, 1 at Milton Keynes and 1 at Watford. This means that the journey times are (roughly) consistent with variations by only a few minutes, and that those three stations have an hourly service to Birmingham. Someone going from (say) Rugby to Milton Keynes can use alternative services.

I'd agree there - the Birmingham route is a good example of what works well. The trouble is you'll always find a journey that worked better on the "random" timetable before, and those people tend to complain

 

[daccer]

Of course what old Beardie says is pretty obvious and actually just commonsense. Call me a cynic but I do question the timing somewhat. we have just had a 35bn pound budget announced for NR. Part of this was for station improvements and large scale renewals on the rails. However it appears that this isnt enough for Branson. Could this announcement have anything to do with the fact that the East Coast may be up for grabs soon and that Virgin's West Coast monopoly has only a couple of years to go.

Branson is the king of timing. He sees some weakness both in the Govt and some of his fellow TOC's. He doesnt do charity - if he wants to pump money into the railway you can bet he will get it back five times over through subsidy or moderation of competition. When all is said and done he has had years to improve stations on the West Coast but has much actually been done?

 

[Daimler]

I'd agree there - the Birmingham route is a good example of what works well. The trouble is you'll always find a journey that worked better on the "random" timetable before, and those people tend to complain

I wouldn't think a 'random' timetable is necessary - just one that offers a little variation in stopping pattern would be nice - a quick glance through Virgin's Glasgow timetable tells me that anyone wanting, during the day, to go from Watford Junction, Milton Keynes, Rugby, Nuneaton, Tamworth, Lichfield, or Stafford to Warrington, Wigan, Preston, Lancaster, Oxenholme, Carlisle or Glasgow has to change. A little more variation would offer far easier rail journeys - maybe have some that don't stop at all the stations north of Crewe to avoid lengthening journey times?

 

[anthony263]

Arriva did start that they were going to buy new trains for teh cardiff valley lines when the put the bid for the franchise but someone at the DFT told them not to before the control of the franchise was transfered over to the wag.

although that said the Welsh Assembly are going to purchase a few emus for local routes if the great western mainline is electrfied to swansea and they are planning to electrify the valley lines.

besides i have heard that some of the class 165/166 dmus are likely to be split between bristol & the Cardiff valley lines When/If crossrail is built and the line to oxford is electrified.

 

[O L Leigh]

Is there anything stopping Virgin or any other TOC buying new trains?

Yes. The Government.

TOC's don't buy trains. The Government do.

O L Leigh

 

[Waverley125]

he's 100% right. Franchisee's don't invest in new rolling stock/infrastructure as there's very little time to make money back on it. If there's time in a franchise to design, build & operate an upgrade to profit the companies will do it. E.g. TPE could probably vastly increase revenue by providing longer trains & wires, giving a faster, more pleasant (and probably quicker) centre-to-centre trip along the M62 corridor. But in the time it would take to erect wires & build & test new EMUs, the franchise would run out and the money would be wasted.

20 year franchises also bring greater stability. If, say, GNER had been on a 20 year, IMO it would've been much more likely that someone else would have bought GNER as it was a profitable organisation. As long as DfT can set minimum specs for franchises, and retains the power to remove franchisees who are performing poorly, i think the 20 year model would work much better.

 

[tbtc]

Yes. The Government.

TOC's don't buy trains. The Government do.

O L Leigh

But could a TOC do so if they wanted?

(I appreciate it's not cost effective to make that kind of investment on a short term franchise etc etc, but presumably they could if they wanted to)

 

[EM2]

Three articles in the Times today about future investment in railway infrastructure. The first is a general piece, the second about a specific set-up in Italy and the third about the possibility of DB buying Eurostar and HS1:
http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6307746.ece
http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6307750.ece
http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6307749.ece

 

[merlodlliw]

Arriva did start that they were going to buy new trains for teh cardiff valley lines when the put the bid for the franchise but someone at the DFT told them not to before the control of the franchise was transfered over to the wag.

although that said the Welsh Assembly are going to purchase a few emus for local routes if the great western mainline is electrfied to swansea and they are planning to electrify the valley lines.

I wonder about ATW they got the 15 year deal, but up here in the North we are starved of capacity, as you have stated, its all in the South, we have rolling stock on the Holyhead/Birm route falling to pieces, and now in Mid Wales the ertms is delayed yet another year to 2010.

 

[Metroland]

Sir Richard Branson, co-owner of Virgin Trains, has urged the government to overhaul rail franchises after warning that the system "does not work".

The Virgin tycoon called on the rail minister, Lord Adonis, today to implement longer franchise contracts and give train operators a stronger role in improving stations and services. Branson added that the latest contracts, which reaped a multibillion-pound windfall for the government, failed to fulfil the original vision of encouraging companies to invest.

http://www.guardian.co.uk/business/2009/may/19/virgin-trains-franchise-policy-criticism
--- old post above --- --- new post below ---
VIRGIN Boss Sir Richard Branson has called for franchises to last between 20 and 30 years in exchange for a £1 billion investment on trains and track on the West Coast main line.

Speaking at a business briefing at London Euston station, the Virgin group founder mapped out his 2020 vision for the line as a way forward to meet ever increasing passenger and freight demands.

His speech came as Virgin Trains moves into the final three years of its 15-year franchise which has seen the introduction of the new Pendolino fleet, running at 125 mph between London, the West Midlands, the North West and Scotland.

Clearly setting out Virgin’s stall for the next West Coast franchise, the billionaire head of the Virgin group of companies told chambers of commerce and other business leaders that crumbling stations should be modernised with fit-for-purpose buildings that work efficiently for rail passengers and become a source of pride for local communities.

http://www.railnews.co.uk/news/business/2009/05/19-longer-franchises.html

 

[Geezertronic]

He's got a point...

 

[87015]

He's got a point...

Maybe, but he hasn't exactly been falling over himself to provide direct investment in his west coast franchise over the last ten years. Threatening to take Railtrack to the cleaners in a court of law hardly shows a pro-railway system view to me, however much the PUG farce happened virgin also signed up to it and knew how unobtainable it was.

 

[Geezertronic]

Well whether Branson had anything to do with it or not, you've got to give Virgin Trains credit for what they have achieved alongside the WCML upgrades... and you cannot blame them for looking longer term