How would you change the franchise system...?

[Masboroughlad]

Ed Milliband is saying if Labour get into power they will review the whole franchising process.

What do people think would work? Guess it is sort of how should privatisation have been done from day one? And how do we get from the jumbled system of today back to one more simple....?

My thoughts would be:

1) Big four owning infrastructure too.
2) State owned inter-city with local bodies running all local transport.
3) British Rail with modern management in place.

Any other ideas?

 

[bnm]

Concessions. The same as TfL.

 

[daikilo]

Ed Milliband is saying if Labour get into power they will review the whole franchising process.

What do people think would work? Guess it is sort of how should privatisation have been done from day one? And how do we get from the jumbled system of today back to one more simple....?

My thoughts would be:

1) Big four owning infrastructure too.
2) State owned inter-city with local bodies running all local transport.
3) British Rail with modern management in place.

Any other ideas?

I think we need to distinguish between "the franchising process" i.e. the way that services are franchised, and "the process of franchising" i.e. whether franchising is good for the economy/the traveller/the nation. Your suggestions (2) and (3) are in the last category.

Secondly, your suggestion (1) is not about franchising at all. It more addresses the question of whether it is better to have a seperate infrastructure function providing an appropriate level of service to the various train operators (including freight) on a pay-by-use basis is better to have a lead operator owning the infrastructure as well. Would it make sense for say British Airways to own the runways at Heathrow (and maybe the entire airport)?

The only real problem I have today is that a lot of money being paid for a public service is going into private hands. This is neutral at the level of the economy, theoretically negative for the traveller although he is often getting a service at below total cost, but can the nation afford anything else?

Finally, to come back to the franchising issue, what really matters is that there must be strong quality incentives in the franchise wording and non-financial means to correct shortfalls (e.g. if Northern has overcrowding because traffic growth is far above expectation they must have a means to cater for that growth without being out-of-pocket), and there must be healthy competition to win at each franchise renewal.

 

[LNW-GW Joint]

Ed Milliband is saying if Labour get into power they will review the whole franchising process.

They would allow public sector bodies to bid for franchises, though it's difficult to see which public sector bodies would be interested.
Nothing more, especially if it costs money.

There is one public sector model that seems to work with Manchester Airports Group.
Manchester Airport is largely owned by the Greater Manchester boroughs, and is run through their company MAG.
MAG also owns and operates East Midlands, Bournemouth and Stansted airports.
From the MAG web site: http://www.magworld.co.uk/magweb.nsf/Content/AboutUsAndOurAirports

M.A.G is privately managed on behalf of its shareholders:
IFM Investors - 35.5%
Manchester City Council - 35.5%
The other 9 Greater Manchester Councils - 29%. As follows:
The Borough Council of Bolton
The Borough Council of Bury
The Oldham Borough Council
The Rochdale Borough Council
The Council of the City of Salford
The Metropolitan Borough Council of Stockport
The Tameside Metropolitan Borough Council
The Trafford Borough Council
The Wigan Borough Council

Note the "privately managed" bit - the aim is to make a profit.
MAG employees are not public servants, and there are many contractors and outsourced functions, with lots of cross-industry contracts and suppliers.

Would that kind of model work on the railway?

 

[Tio Terry]

Ed Milliband is saying if Labour get into power they will review the whole franchising process.

What do people think would work? Guess it is sort of how should privatisation have been done from day one? And how do we get from the jumbled system of today back to one more simple....?

My thoughts would be:

1) Big four owning infrastructure too.
2) State owned inter-city with local bodies running all local transport.
3) British Rail with modern management in place.

Any other ideas?

Your proposal 1) would not meet the EU requirement that the Infrastructure and Train Operations company's be separate company's.

Your proposal 2) would not meet the EU requirement that Governments don't own (directly) train Operating company's.

Your proposal 3), see 2) above.

The way forward is the East Coast model. A not-for-profit company operating the services with NR providing the Infrastructure. The NFP company could be owned by the ORR or, as has been suggested, an amalgam of Local Authorities.

 

[daikilo]

Your proposal 1) would not meet the EU requirement that the Infrastructure and Train Operations company's be separate company's.

Your proposal 2) would not meet the EU requirement that Governments don't own (directly) train Operating company's.

Your proposal 3), see 2) above.

The way forward is the East Coast model. A not-for-profit company operating the services with NR providing the Infrastructure. The NFP company could be owned by the ORR or, as has been suggested, an amalgam of Local Authorities.

The infrastucture company must have seperate and published accounting and should provide open and equal access to all operators. My understanding is that the SNCF is likely to be restructured in the near future to bring SNCF operations and RFF infrastructure togather under a single holding.

Nowhere does it state that a government body cannot own a TOC, what is stated is the conditions under which such a body would have to be structured.

In other words, if you want to recreate British Rail, copy SNCF. Even a holding company called the British Railways Board PLC would probably be allowable.

What you cannot do is to buy-out the Govia franchise, rename it Network Southeast, decree that the franchise period is extended indefinitely without competition and merge the accounting with the relevant bits of Network Rail.

relevant EU directives are 91/440/CEE as amended by 2001/12/CE

 

[LNW-GW Joint]

Your proposal 1) would not meet the EU requirement that the Infrastructure and Train Operations company's be separate company's.
Your proposal 2) would not meet the EU requirement that Governments don't own (directly) train Operating company's.
Your proposal 3), see 2) above.
The way forward is the East Coast model. A not-for-profit company operating the services with NR providing the Infrastructure. The NFP company could be owned by the ORR or, as has been suggested, an amalgam of Local Authorities.

Your points are not accurate.
EU legislation merely requires the financial separation of infrastructure and operations, mainly to permit competition on a level playing field for new entrants.
Even the Fourth Railway Package (not yet implemented) will allow government ownership of TOCs and infrastructure.
Most EU railway legislation is about open access, standards and cross-border operation, not about how the individual states run their trains.

Despite their successes, DOR on the East Coast case is not a very appropriate one for the future.
They did not bid competitively for EC, they were hired by DfT to manage it on a short-term basis.
They did not have to raise any capital for the bid or operation, and have a service agreement not a franchise contract. DfT takes the risk.

Concessions, like LO, Merseyrail and now CR, are just franchises where the contracting authority takes the revenue risk and decides investment.
The TOC underneath is still a private company.
Also ORR is the regulator, so cannot own a TOC. They can't be judge and jury over their own track access applications.

http://en.wikipedia.org/wiki/Fourth_railway_package

 

[Moonshot]

They would allow public sector bodies to bid for franchises, though it's difficult to see which public sector bodies would be interested.
Nothing more, especially if it costs money.

There is one public sector model that seems to work with Manchester Airports Group.
Manchester Airport is largely owned by the Greater Manchester boroughs, and is run through their company MAG.
MAG also owns and operates East Midlands, Bournemouth and Stansted airports.
From the MAG web site: http://www.magworld.co.uk/magweb.nsf/Content/AboutUsAndOurAirports


Note the "privately managed" bit - the aim is to make a profit.
MAG employees are not public servants, and there are many contractors and outsourced functions, with lots of cross-industry contracts and suppliers.

Would that kind of model work on the railway?

This is a very intelligent question to ask......my answer would be yes. The reeason being is that currently, rail franchises are often thinly capitalised joint ventures. I see no reason why even with public funding constraints that local authorities could not set up joint ventures in the same way as MAG.

 

[starrymarkb]

The Swiss private railways operate on a similar model to MAG. Each is usually owned by a consortium of local councils and local businesses.

 

[dstrat]

Whatever method of operating it, it should not be used as a financial investment for the few to make profit out of, it should be run as to provide the best service to the passenger, whilst providing a good life for those working on the railway.

The departments of the state know they can run the railway - see Network Rail and DoR/East Coast. Ideally, all current employees on the railway should be TUPE'd over to some national entity and then some thinking as to regional segmentation could be made (assuming the current split of services between TOCs is arguably overly convoluted).

Transfer all national assets - the trains - from the ROSCOs and eliminate the various layers of organisations that have their fingers in the pie and getting their slice of the profit.

All surpluses (profits) that are then saved....reinvest back into the network.
--- old post above --- --- new post below ---

Your points are not accurate.
EU legislation merely requires the financial separation of infrastructure and operations, mainly to permit competition on a level playing field for new entrants.
Even the Fourth Railway Package (not yet implemented) will allow government ownership of TOCs and infrastructure.
Most EU railway legislation is about open access, standards and cross-border operation, not about how the individual states run their trains.

Despite their successes, DOR on the East Coast case is not a very appropriate one for the future.
They did not bid competitively for EC, they were hired by DfT to manage it on a short-term basis.
They did not have to raise any capital for the bid or operation, and have a service agreement not a franchise contract. DfT takes the risk.

Concessions, like LO, Merseyrail and now CR, are just franchises where the contracting authority takes the revenue risk and decides investment.
The TOC underneath is still a private company.
Also ORR is the regulator, so cannot own a TOC. They can't be judge and jury over their own track access applications.

http://en.wikipedia.org/wiki/Fourth_railway_package

You mean so when National Express took on the ECML they took the risk as well?

Because clearly they did not, hence why the handed it back for the DfT to pick up the pieces.

 

[daikilo]

Whatever method of operating it, it should not be used as a financial investment for the few to make profit out of, it should be run as to provide the best service to the passenger, whilst providing a good life for those working on the railway.

The departments of the state know they can run the railway - see Network Rail and DoR/East Coast. Ideally, all current employees on the railway should be TUPE'd over to some national entity and then some thinking as to regional segmentation could be made (assuming the current split of services between TOCs is arguably overly convoluted).

Transfer all national assets - the trains - from the ROSCOs and eliminate the various layers of organisations that have their fingers in the pie and getting their slice of the profit.

All surpluses (profits) that are then saved....reinvest back into the network.
--- old post above --- --- new post below ---


You mean so when National Express took on the ECML they took the risk as well?

Because clearly they did not, hence why the handed it back for the DfT to pick up the pieces.

As it hapoens, when I joined BR I also joined a Union, as I had no choice. I prefered to be active on strike days to protect the rail infrastructure.

There is clearly something to be clarified in franchising if the selected operator can hand back without or with penalties. I am not saying this was the case for EC.

 

[Bald Rick]

You mean so when National Express took on the ECML they took the risk as well?

Because clearly they did not, hence why the handed it back for the DfT to pick up the pieces.

They most certainly did, and it cost them well over £100m to hand the keys in.

 

[Moonshot]

Whatever method of operating it, it should not be used as a financial investment for the few to make profit out of, it should be run as to provide the best service to the passenger, whilst providing a good life for those working on the railway.

The departments of the state know they can run the railway - see Network Rail and DoR/East Coast. Ideally, all current employees on the railway should be TUPE'd over to some national entity and then some thinking as to regional segmentation could be made (assuming the current split of services between TOCs is arguably overly convoluted).

Transfer all national assets - the trains - from the ROSCOs and eliminate the various layers of organisations that have their fingers in the pie and getting their slice of the profit.

All surpluses (profits) that are then saved....reinvest back into the network.
--- old post above --- --- new post below ---


You mean so when National Express took on the ECML they took the risk as well?

Because clearly they did not, hence why the handed it back for the DfT to pick up the pieces.

But what if the " best service to the passenger " was proven to be more effective in the private as opposed to the public sector?

 

[colchesterken]

One big operating company,The Scots have gone off on their own and the Welsh want to, let them
Call it English railways, get rid of the Dutch and Germans lets run it for our benifit not other peoples
The subsidies could be paid as now .It would be a not for profit co. They could move the stock around as needed, Chris Green and Gordon Petit as bosses Ohh let them have an accountant to count the beans.
Then the railway could be run for our benifit not Virgins shareholders or the state railways of other countries

 

[Dave1987]

For those saying that the railways should be run on a non for profit basis, when was the last time you complained that the buses and airlines are not run as non for profit companies? They do exactly the same job of transporting you from A to B. I find it amazing how people constantly demand the railways be run non for profit yet they never make the same demand of buses, cars or airlines! What makes the railways a special case that they must be run as non for profit?

 

[NSEFAN]

For those saying that the railways should be run on a non for profit basis, when was the last time you complained that the buses and airlines are not run as non for profit companies? They do exactly the same job of transporting you from A to B. I find it amazing how people constantly demand the railways be run non for profit yet they never make the same demand of buses, cars or airlines! What makes the railways a special case that they must be run as non for profit?

To be fair, this is a railway forum and we are discussing the franchising of passenger services. I'm sure some would argue for not-for-profit operation of the buses too. Have the airlines ever been subsidised, controlled and franchised by the state in the same way that happens with the railways?

 

[thealexweb]

Can someone outline the current concession model?

 

[Barn]

Can someone outline the current concession model?

It usually involves a private company performing a closely defined service specification for a fee. Revenue belongs to the awarding body (like TfL) as does the risk of that revenue falling or not developing as well as hoped.

Incidentally, 'concession' is actually entirely the wrong word for this. In procurement law, a concession is an arrangement whereby the contractor runs the service as a business and takes the key risks itself - more akin to a franchise. It's a complete misnomer but TfL started using it and it has stuck.

 

[dstrat]

Fair enough Daikilo.

They most certainly did, and it cost them well over £100m to hand the keys in.

That is fair enough if so, however it still means that the project didn't match up with the desires of the National Express group and on that basis dropped it. Even though it happens to be a fairly critical piece of national infrastructure!

But what if the " best service to the passenger " was proven to be more effective in the private as opposed to the public sector?

Well, as it always is, it is service towards making profit first and apparently according to some, somehow the better they can do this, the better experience for the passenger.

Which actually conflicts with logic if you are taking as much money as you can (or at least most) away from the railway!

For those saying that the railways should be run on a non for profit basis, when was the last time you complained that the buses and airlines are not run as non for profit companies? They do exactly the same job of transporting you from A to B. I find it amazing how people constantly demand the railways be run non for profit yet they never make the same demand of buses, cars or airlines! What makes the railways a special case that they must be run as non for profit?
__________________

I guess you can say there is a difference, considering how massively subsidised the railways are....we, as taxpayer and farepayer, pay more than the firms that operate it do. (I'm not saying considerable subsidisation doesn't go on in bus world, because it does - however not on the levels seen with trains).

Also, I don't think it is unfair to consider trains as the gold standard in public transport for commuting and travel around one's country. Your economy can only be as good as people's ability to be mobile (especially in the world we have now with distances that people commute).

Can you imagine London without it's trains? It is a critical people mover. And as NSE says, this is a rail forum

 

[LNW-GW Joint]

To be fair, this is a railway forum and we are discussing the franchising of passenger services. I'm sure some would argue for not-for-profit operation of the buses too. Have the airlines ever been subsidised, controlled and franchised by the state in the same way that happens with the railways?

British Airways (or its predecessors) was nationalised until 1987, when it was privatised along with BAA (airports) and part of air traffic control.
Unlike BR, BA was privatised intact as a going concern.
Buses have been in and out of nationalisation over the years but were finally privatised in 1988 in many small pieces.
Ferries were often owned by the railways but BR Sealink was privatised to Stena in 1984.
Eurostar is state owned (jointly by SNCF, L&CR(DfT) and SNCB), although HS1 has been leased out privately.

There is very little direct subsidy in the airline/bus/ferry market, so the government does not intervene and leaves it to the regulators.
Some individual routes are supported by government (eg rural buses and Scottish islands).
What distinguishes rail is the large amount/proportion of subsidy, which is why the government largely retains control.
Strictly, rail passenger services are public assets and are only temporarily in private hands during a franchise.
Freight services were fully privatised in 1997 (although DRS is still in public hands, being part of the Nuclear Decommissioning Authority).

 

[HowardGWR]

It seems to me that the franchising system can work very well. If there is more commitment to improving the network, as well as the services, in the way that Chiltern committed itself, then we could have some very exciting projects on the go.

What if, for instance, SWT was to commit to reopening Exeter to Okehampton, or doubling Salisbury to Exeter, in partnership with local authorities and NR?

 

[swt_passenger]

It seems to me that the franchising system can work very well. If there is more commitment to improving the network, as well as the services, in the way that Chiltern committed itself, then we could have some very exciting projects on the go.

What if, for instance, SWT was to commit to reopening Exeter to Okehampton, or doubling Salisbury to Exeter, in partnership with local authorities and NR?

Why would SWT ever do that? They wouldn't, because they do not have the unique franchise specification Chiltern had. Chilterns '10+10' 20 year deal was the first and only deal that ever required infrastructure work to be done by a franchisee.

 

[Dave1987]

So what this boils down to is people having issue with a railway being run day to day by private companies when it can't survive without big subsidies from the govt?

 

[Moonshot]

So what this boils down to is people having issue with a railway being run day to day by private companies when it can't survive without big subsidies from the govt?

In a nutshell yes.....and of course whether the rail network is left as it is OR re nationalised, it would still require subsidy. However, nowadays subsidy comes in the form of grant for investment, as the day to day operations pretty much " wipe their face " with farebox revenue.

A lot of forumites seem to have issues with franchisees paying dividends to shareholders..........but that is exactly what the private sector does and always has done.

 

[Oscar]

I think a concessions model would be much more appropriate than the current franchising model. A nationalised system could also work well with good management and funding. The government should give the infrastructure manager a guaranteed flow of money like Network Rail currently receives to implement HLOS. Infrastructure and timetabling should be considered together and maximising connectivity and making the most efficient use of resources should come before local political considerations. We need a single body thinking in the long term for the good of the national network taking long-term planning decisions after consulting a wide range of bodies. The Verkehrsverbund model of devolution has been very successful in the German-speaking world: timetables and fares are set by a body representing transport companies and local politicians and this body can also invest. The Labour and Green Parties are obsessed with the "re-nationalisation" issue and give too little thought to how the industry should actually be organised.

 

[NSEFAN]

British Airways (or its predecessors) was nationalised until 1987, when it was privatised along with BAA (airports) and part of air traffic control.
Unlike BR, BA was privatised intact as a going concern.

Interesting. Presumably the only reason the airlines can sustain themselves is because they are not forced to run loss-making services?

A lot of forumites seem to have issues with franchisees paying dividends to shareholders..........but that is exactly what the private sector does and always has done.

I think there are several reasons why people question whether private companies should be running the service.

• There is an assumption that private companies care about their customers, but in a cashcow situation this is not always true (remember Connex South Central?)
• More subsidy is now pumped into the railway than BR could have ever dreamed of. Some would argue that if BR had been kept but given more subsidy, we'd have seen a similar level of improvement.
• The railway is much more heavily under state control than it was under BR, to the point that the TOCs are effectively providing little more than customer relations. It is ultimately the state that has to ensure the trains run on time, which is what I'd imagine most passengers fundamentally care about.
• The UK rail industry is heavily fragmented, meaning many more private companies are needed to make it work. Each one needs to be profitable and hence the overall cost goes up.
• The government will claim it supports competition on the railways and yet open access operators are harmful to the treasury as they abstract revenue from the franchised operators.

I don't have a problem with a private company being paid to run a service on behalf of the government. Long gone are the days of vertical integration where everything was done in-house. If we are to keep private operation, I feel that loss-making services and commuter trains should be run on a concession basis to ensure a basic minimum that people can rely on. Intercity routes however could be opened up to more open access as these seem to be the ones which have any hope of turning a profit. Freight is doing rather well out of private operation, but it too is arguably subsidised through reduced track access charges.

 

[OLJR]

I would mandate DOR to bid for every available franchise as a public sector comparison.

 

[SpacePhoenix]

It seems to me that the franchising system can work very well. If there is more commitment to improving the network, as well as the services, in the way that Chiltern committed itself, then we could have some very exciting projects on the go.

What if, for instance, SWT was to commit to reopening Exeter to Okehampton, or doubling Salisbury to Exeter, in partnership with local authorities and NR?

Ignoring the cost, is there even the room along the length of the route to double the Salisbury-Exeter route? If it were to be doubled could it be electrified (AC) at the same time?

 

[Moonshot]

Interesting. Presumably the only reason the airlines can sustain themselves is because they are not forced to run loss-making services?


I think there are several reasons why people question whether private companies should be running the service.

• There is an assumption that private companies care about their customers, but in a cashcow situation this is not always true (remember Connex South Central?)
• More subsidy is now pumped into the railway than BR could have ever dreamed of. Some would argue that if BR had been kept but given more subsidy, we'd have seen a similar level of improvement.
• The railway is much more heavily under state control than it was under BR, to the point that the TOCs are effectively providing little more than customer relations. It is ultimately the state that has to ensure the trains run on time, which is what I'd imagine most passengers fundamentally care about.
• The UK rail industry is heavily fragmented, meaning many more private companies are needed to make it work. Each one needs to be profitable and hence the overall cost goes up.
• The government will claim it supports competition on the railways and yet open access operators are harmful to the treasury as they abstract revenue from the franchised operators.

I don't have a problem with a private company being paid to run a service on behalf of the government. Long gone are the days of vertical integration where everything was done in-house. If we are to keep private operation, I feel that loss-making services and commuter trains should be run on a concession basis to ensure a basic minimum that people can rely on. Intercity routes however could be opened up to more open access as these seem to be the ones which have any hope of turning a profit. Freight is doing rather well out of private operation, but it too is arguably subsidised through reduced track access charges.

Freight companies pay the " avoidable cost " of running a freight train......a train which will only run when there is an actual customer requiring the service.

Going back to your point about airlines.....there are a very small number of services which attract state funds through PSO ( Public Service Obligations ). These are almost always in remote areas such as the Scottish Highlands. Of course airlines in general have little or no compelled demand, and as such can attract high load factors per flight irrespective of what time of day or night an aircraft flies.

 

[Dave1987]

The real big issue you stumble into if you have full nationalisation is that the treasury hold the purse strings for the railway and that undoubtedly the one of the first things that would be cut if savings needed to be made would be to the railway budget on day to day running. I'm not talking about capital investment. At least with a franchise or concession or whatever you want to call it the treasury does not control day to day spending. Yes reform the franchise system so private companies have to up their game. If the railway is running at a huge loss and has to be supported by subsidies then maybe a serious look needs to given to the services that are making a massive loss. It may be the case that some lines are told "use it or lose it" like what has happened to a lot of bus routes that were hardly used.