How would you change the franchise system...?

[Moonshot]

Fast forward to post general election next year , a general election labour could win . Who will then be deciding who runs the railways . A labour minister in the DFT , what have labour said they wish to see after the next election ? Thats right a public body bidding for and ultimately running franchises. Is this a plan you support ?

Why would I be against that ? if a public body wishes to bid for a rail franchise, then so be it. And if you had an independent franchising authority as you state, then surely that body would have its proposals scrutinised in the same way as a private sector operation would ?

What is there to stop the current East Coast Management launching a buy out? Nothing.....I dont see them throwing there hat in the ring though. What is there to stop RMT doing the same ? Nothing , but as far as i can see they havent.

 

[muz379]

Why would I be against that ? if a public body wishes to bid for a rail franchise, then so be it. And if you had an independent franchising authority as you state, then surely that body would have its proposals scrutinised in the same way as a private sector operation would ?

What is there to stop the current East Coast Management launching a buy out? Nothing.....I dont see them throwing there hat in the ring though. What is there to stop RMT doing the same ? Nothing , but as far as i can see they havent.

What if labour went one step further and implemented a policy where all franchises on expiry revert to state operation . So in 30 years time we are back to square one , would you support that ?

 

[Moonshot]

What if labour went one step further and implemented a policy where all franchises on expiry revert to state operation . So in 30 years time we are back to square one , would you support that ?

No ..because as I ve pointed out before, the industry would then be subject to State Spending limits in the same way as every other public sector operation is. And I would have to suffer a pay freeze !!

what would happen to Open Access Operations under labours plans to revert back to a full nationalised services?

 

[muz379]

No ..because as I ve pointed out before, the industry would then be subject to State Spending limits in the same way as every other public sector operation is. And I would have to suffer a pay freeze !!

what would happen to Open Access Operations under labours plans to revert back to a full nationalised services?

A simple yay or nay would suffice I was playing devils advocate not putting my preferred soloution forward
under the current system a lab gov could inplement that system if it so desired . If we had an independant body awarding franchises said decision would have to result in the independant body being done away with first
Sounds better to me already .

Any thoughts on longer franchises ?

 

[Moonshot]

A simple yay or nay would suffice I was playing devils advocate not putting my preferred soloution forward
under the current system a lab gov could inplement that system if it so desired . If we had an independant body awarding franchises said decision would have to result in the independant body being done away with first
Sounds better to me already .

Any thoughts on longer franchises ?

If longer franchises meant it was more attractive for TOCs to risk there own capital to enhance the passenger experience then yes. As it stands now , there is no incentive for them to do that.....why would they when they have no say in what to invest in or what price to charge for the benefits of that investment.

 

[Whistler40145]

I would split the running of services into different levels of service throughout the network, therefore you have InterCity franchises running top class services, Express franchises running e.g. Liverpool-Newcastle style services & local/stopping service franchises, each level of franchise would have one livery with own logos e.g. InterCity West Coast, TransPennine Express or Midland Regional, each type of franchise would also share Advance Purchase ticketing. Also, if a franchisee wishes to obtain extra rolling stock, they could do so if they funded it without DfT having a total say.

 

[NSEFAN]

If longer franchises meant it was more attractive for TOCs to risk there own capital to enhance the passenger experience then yes. As it stands now , there is no incentive for them to do that.....why would they when they have no say in what to invest in or what price to charge for the benefits of that investment.

Have Chiltern not been given a long franchise? They have done a lot to improve their services, but how much of this has been on their part and how much has been planned by the DfT?

 

[Moonshot]

Have Chiltern not been given a long franchise? They have done a lot to improve their services, but how much of this has been on their part and how much has been planned by the DfT?

No idea....how much of their own capital is being risked in the Evergreen Project?

 

[muz379]

If longer franchises meant it was more attractive for TOCs to risk there own capital to enhance the passenger experience then yes. As it stands now , there is no incentive for them to do that.....why would they when they have no say in what to invest in or what price to charge for the benefits of that investment.

I can see that side of the argument

On the other hand , would giving the TOC's longer franchise terms by default actually just make them lazy and complacent in the way that the current system with extensions granted on a target driven basis keeps them on their toes ?

 

[shinkansen1966]

On the other hand , would giving the TOC's longer franchise terms by default actually just make them lazy and complacent

No.

Chiltern Railways has the longest franchise. Just look at what's happened on their route.

 

[Moonshot]

I can see that side of the argument

On the other hand , would giving the TOC's longer franchise terms by default actually just make them lazy and complacent in the way that the current system with extensions granted on a target driven basis keeps them on their toes ?

Why would it make them lazy if they had longer franchises which involved taking both the risk with revenue and capex? If anything it would just make them work harder.....they do have shareholders as stakeholders who also have the power to remove CEOs if they underperform.

Whilst I accept that rail growth over the years can be linked to exogenous factors, nonetheless the incentive of targets for performance and finance does sharpen the senses in terms of controlling costs. This is where the private sector far outperforms the public sector.

 

[muz379]

No.

Chiltern Railways has the longest franchise. Just look at what's happened on their route.

Ahh , I was not really aware of what all tocs had done and what length franchises they have . Hence why I posed it as a question .

Tell me for Chiltern was their franchise awarded as a long length from the very beginning , or has it been extended in the same way northern and VT has because of direct awards ? . Also how much say have the DFT had in specifying how they invest ?

Why would it make them lazy if they had longer franchises which involved taking both the risk with revenue and capex? If anything it would just make them work harder.....they do have shareholders as stakeholders who also have the power to remove CEOs if they underperform.

Whilst I accept that rail growth over the years can be linked to exogenous factors, nonetheless the incentive of targets for performance and finance does sharpen the senses in terms of controlling costs. This is where the private sector far outperforms the public sector.

How are you measuring this performance ?

The only way shareholders are going to be measuring performance , and exercising any power to replace the CEO is if their dividend falls or their investment is in danger .

But is this the correct way to measure performance on the railway ?


Is there not mileage in the argument that PPM would mean less to the TOC because it wouldn't be being used as a basis on which to award the franchise for longer under performance based awards ?

 

[Moonshot]

Ahh , I was not really aware of what all tocs had done and what length franchises they have . Hence why I posed it as a question .

Tell me for Chiltern was their franchise awarded as a long length from the very beginning , or has it been extended in the same way northern and VT has because of direct awards ? . Also how much say have the DFT had in specifying how they invest ?



How are you measuring this performance ?

The only way shareholders are going to be measuring performance , and exercising any power to replace the CEO is if their dividend falls or their investment is in danger .

But is this the correct way to measure performance on the railway ?


Is there not mileage in the argument that PPM would mean less to the TOC because it wouldn't be being used as a basis on which to award the franchise for longer under performance based awards ?

Perfomance on the railway is underpinned by contracts with incentives between the players. Passengers also have rights in this respect. You can see the effects of incentives on your own job.....the prospect of commission on ticket sales incentivises guards to collect revenue which in some cases might not see anyones pockets.

As far your last point, a key element missing from the early days of franchises was the qualitive element.....this isnt the easiest thing to measure , but having Passenger Focus on board as part of the Franchising Authority would be a start - which goes bacl to your point about independence of this authority.

 

[muz379]

Perfomance on the railway is underpinned by contracts with incentives between the players. Passengers also have rights in this respect. You can see the effects of incentives on your own job.....the prospect of commission on ticket sales incentivises guards to collect revenue which in some cases might not see anyones pockets.

As far your last point, a key element missing from the early days of franchises was the qualitive element.....this isnt the easiest thing to measure , but having Passenger Focus on board as part of the Franchising Authority would be a start - which goes bacl to your point about independence of this authority.

But then if you got rid of that commission and just paid us guards an extra --Insert average yearly commission here-- then you would obviously see revenue collection going down as less guards would actually bother to collect revenue .

Is guaranteeing the TOC the franchise for longer without any performance related aspect to the award process not the same as getting rid of our commission . in that they wont have to work as hard to meet their performance targets to run the toc for longer ?

Or do you think (like I actualy do ) that the profit margins in it for TOC's are not that high that they would go into the business with any sense of complacency or laziness , the investors and the management at the TOC are well aware of what they are getting into and that it isnt easy money really by any stretch of the imagination

if the investors wanted a quick buck they might go and invest in an NHS or MOD tender or a energy supplier or a big four supermarket where there is a lot of complacency because the profit margins and potential to make money with minimal effort and risk is higher .

Yeah I do think passenger groups have a role to play in the franchising process ,just in the same way that economists , people that have experience in railway operations , and even people with experience in other business areas have a part to play

 

[Moonshot]

But then if you got rid of that commission and just paid us guards an extra --Insert average yearly commission here-- then you would obviously see revenue collection going down as less guards would actually bother to collect revenue .

Is guaranteeing the TOC the franchise for longer without any performance related aspect to the award process not the same as getting rid of our commission . in that they wont have to work as hard to meet their performance targets to run the toc for longer ?

Or do you think (like I actualy do ) that the profit margins in it for TOC's are not that high that they would go into the business with any sense of complacency or laziness , the investors and the management at the TOC are well aware of what they are getting into and that it isnt easy money really by any stretch of the imagination

if the investors wanted a quick buck they might go and invest in an NHS or MOD tender or a energy supplier or a big four supermarket where there is a lot of complacency because the profit margins and potential to make money with minimal effort and risk is higher .

Yeah I do think passenger groups have a role to play in the franchising process ,just in the same way that economists , people that have experience in railway operations , and even people with experience in other business areas have a part to play

There you go then, you ve just re inforced the point I made about incentives.

As for " making a quick buck out of tenders " dont forget that there are tendering processes to filter down the applicants. One aspect of rail franchising is that the T & Cs of these contained cap and collar arrangements, so that any profits above a certain % were shared between the state and the operator. Even if this didnt work, the state can use a " windfall tax " scenario as a stick.....its also worth pointing out that private sector operations also pay corporation tax, this is something which is conveniently forgotten by a lot of forumites when mentioning the likes of Utilty Companies which were divested by the state years ago to relieve the taxpayer the burden of subsidising what were then very ineffiecient industries.

 

[muz379]

There you go then, you ve just re inforced the point I made about incentives.

As for " making a quick buck out of tenders " dont forget that there are tendering processes to filter down the applicants. One aspect of rail franchising is that the T & Cs of these contained cap and collar arrangements, so that any profits above a certain % were shared between the state and the operator. Even if this didnt work, the state can use a " windfall tax " scenario as a stick.....its also worth pointing out that private sector operations also pay corporation tax, this is something which is conveniently forgotten by a lot of forumites when mentioning the likes of Utilty Companies which were divested by the state years ago to relieve the taxpayer the burden of subsidising what were then very ineffiecient industries.

I dont see how I have re inforced your point . I was saying if you gurantee guards money for something they currently have to go out and work for they wont work as hard .
That was the argument I was investigating in terms of franchising - I.e. if you guarantee a toc a longer franchise they wont have to go out and work as hard to meet the performance targets whereas currently they have targets to meet and if they dont meet them there are penalties for that . Take away the incentives , what is there left for people to work towards ?

There is no doubt some companies have and will continue to make a quick buck out of government tenders , look at the scandal that occurred with PFI. Even the government at the time had to acknowledge that the scheme was completely inefficient . Even if the people making that quick buck pay corporation tax and a windfall tax (ill believe that when I see it ) the tax payer is still worse of the tune of the profit that these people are making . Not every tender is like this of course some actually work out ok for the taxpayer


I actually think utility supply along with a number of other things like prisons should be wholly nationalised industries ,but that is another discussion altogether ,

 

[Moonshot]

I dont see how I have re inforced your point . I was saying if you gurantee guards money for something they currently have to go out and work for they wont work as hard .
That was the argument I was investigating in terms of franchising - I.e. if you guarantee a toc a longer franchise they wont have to go out and work as hard to meet the performance targets whereas currently they have targets to meet and if they dont meet them there are penalties for that . Take away the incentives , what is there left for people to work towards ?

There is no doubt some companies have and will continue to make a quick buck out of government tenders , look at the scandal that occurred with PFI. Even the government at the time had to acknowledge that the scheme was completely inefficient . Even if the people making that quick buck pay corporation tax and a windfall tax (ill believe that when I see it ) the tax payer is still worse of the tune of the profit that these people are making . Not every tender is like this of course some actually work out ok for the taxpayer


I actually think utility supply along with a number of other things like prisons should be wholly nationalised industries ,but that is another discussion altogether ,

Now you are just confusing yourself......

 

[muz379]

Now you are just confusing yourself......

Oh really ...

Do please enlighten me then :roll:

 

[Moonshot]

So if you take away Guards commission , you say they wont work as hard?

 

[muz379]

So if you take away Guards commission , you say they wont work as hard?

you said yourself that the commission is an incentive , surely then you are inferring that if there was no incentive some guards would no longer do revenue duties . or perhaps would not be as diligent in carrying out revenue duties ?

 

[Moonshot]

you said yourself that the commission is an incentive , surely then you are inferring that if there was no incentive some guards would no longer do revenue duties . or perhaps would not be as diligent in carrying out revenue duties ?

You said that yourself at 1.06 this morning.

What do you think would happen to revenue if Northern Rail decided to offer 30% commission to guards ?

 

[muz379]

You said that yourself at 1.06 this morning.

What do you think would happen to revenue if Northern Rail decided to offer 30% commission to guards ?

So we agree on that then getting rid of the incentive for guards to do revenue duties would mean less would undertake those duties

so where am I getting confused ?

Is it because I said then that getting rid of the incentive for TOC's to hit certain targets would mean some of them would consider these targets as optional , in the same way some guards would not bother carrying out revenue duties if there was no incentive ?

My personal viewpoint on it is that there is a risk that just granting TOC's extended franchises does carry this risk (just like other government contracts in other areas have been seen issues with performance ) and something should be done to mitigate that risk (be it fines etc for not meeting PPM ) but that risk alone should not stand in the way of us granting extended contracts because in the long run the benefits of the extended franchises far outweigh these risks

 

[Moonshot]

So we agree on that then getting rid of the incentive for guards to do revenue duties would mean less would undertake those duties

so where am I getting confused ?

Is it because I said then that getting rid of the incentive for TOC's to hit certain targets would mean some of them would consider these targets as optional , in the same way some guards would not bother carrying out revenue duties if there was no incentive ?

My personal viewpoint on it is that there is a risk that just granting TOC's extended franchises does carry this risk (just like other government contracts in other areas have been seen issues with performance ) and something should be done to mitigate that risk (be it fines etc for not meeting PPM ) but that risk alone should not stand in the way of us granting extended contracts because in the long run the benefits of the extended franchises far outweigh these risks

Buit fines are already imposed for not meeting targets......Network Rail recently paid over £50 million in that respect. Power companies do the same for consumers when they are left with no electric.....

 

[muz379]

Buit fines are already imposed for not meeting targets......Network Rail recently paid over £50 million in that respect. Power companies do the same for consumers when they are left with no electric.....

I know this hence why I used it as an example


In principle what I am saying is if something replaces the incentives for performance like we have now that potential issue of longer franchises can be negated

What do you think about another potential issue with long franchises . The anti competition element longer franchises could introduce . Being quite a clear capitalist you must consider competition to be an important feature of the private sector that brings about new ideas and options . Would longer franchises take away from the competitive element of the way railways are run ?

 

[Moonshot]

I know this hence why I used it as an example


In principle what I am saying is if something replaces the incentives for performance like we have now that potential issue of longer franchises can be negated

What do you think about another potential issue with long franchises . The anti competition element longer franchises could introduce . Being quite a clear capitalist you must consider competition to be a good thing that brings about new ideas and options . Would longer franchises take away from the competitive element of the way railways are run ?

No because franchises are competitions " for the market " and not " in the market ". Introducing longer franchise terms doesnt negate the fact that the franchise still has to be subject to competing bids in the first place....IIRC there are 4 on the table for the upcoming East Coast franchise.

There are some examples however that already exist where TOCS who run over the same stretch of track do compete with each other on price.

 

[muz379]

No because franchises are competitions " for the market " and not " in the market ". Introducing longer franchise terms doesnt negate the fact that the franchise still has to be subject to competing bids in the first place....IIRC there are 4 on the table for the upcoming East Coast franchise.

There are some examples however that already exist where TOCS who run over the same stretch of track do compete with each other on price.

Could decreasing the frequency of this compettition. Not have any effect ?

 

[Moonshot]

Could decreasing the frequency of this compettition. Not have any effect ?

If it did , what incentive would TOCs have for bringing in their own investment capital? Which as they have stated. they are quite prepared to do IF the investment had sufficient time to make returns. Dont forget, investment in the rail network per se has higher than average lead times in the first place.

I ve just realised I misread your point......decreasing the frequency also means longer franchises....which in terms of attracting investment from the private sector is very attractive!!

 

[muz379]

If it did , what incentive would TOCs have for bringing in their own investment capital? Which as they have stated. they are quite prepared to do IF the investment had sufficient time to make returns. Dont forget, investment in the rail network per se has higher than average lead times in the first place.

I ve just realised I misread your point......decreasing the frequency also means longer franchises....which in terms of attracting investment from the private sector is very attractive!!

Okay . So how much influence should the body awarding the franchise have ?

 

[Moonshot]

Okay . So how much influence should the body awarding the franchise have ?

Influence in what way ?

 

[muz379]

You tell me what areas you think the state should and shouldnt influence