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How would you change the franchise system...?

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Moonshot

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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.

In your opinion , how would you incentivise franchisees or concession holders to up their game?
 
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LNW-GW Joint

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

DOR is an arm of the DfT.
How do you run a franchise competition with your own department bidding?
It would have to be another arm of the public sector.
It then becomes very difficult to think of any public sector body which is interested in becoming a TOC.
The only ones I can think of are DRS, TfL and Eurostar (partly; it is majority French-owned). Maybe SPT in Glasgow (they run the subway).
Perhaps Manchester Airports Group or similar local authority transport/utility body (see other post).
The owners of these "businesses" would have to have a reason to go into rail franchising and risk their taxpayers' money.
 

LateThanNever

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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.
Which really indicates that the advantage - one of the few!- of the franchise system is that it is fixed for 5,10 or 15 years or whatever so the treasury has to look elsewhere! Meanwhile the shareholders take their 2%...
You wouldn't invent it but I suppose we are where we are and if other countrys' railways are running ours for a time we should at least have the opportunity of running somebody else's! Never realised the Nuclear Decommissioning Authority had such potential...
 

Moonshot

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Which really indicates that the advantage - one of the few!- of the franchise system is that it is fixed for 5,10 or 15 years or whatever so the treasury has to look elsewhere! Meanwhile the shareholders take their 2%...
You wouldn't invent it but I suppose we are where we are and if other countrys' railways are running ours for a time we should at least have the opportunity of running somebody else's! Never realised the Nuclear Decommissioning Authority had such potential...

Whats the issue with shareholders taking a profit ?
 

LateThanNever

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Whats the issue with shareholders taking a profit ?
None at all - it was only the identity of the shareholders that I consider undesirable. Bus companies who were found unfit to run bus companies by the monopolies and merger commission ( as was) and other country's nationalised industries seem to me to bring little advantage...
 

DimTim

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The current franchise system appears to select the bidder that will offer the greatest return to DfT. The concession model appears to my mind, at least, reward a bidder who will run an agreed service for the lowest price. i.e. one drives prices up the other may bring costs down
 

LateThanNever

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The current franchise system appears to select the bidder that will offer the greatest return to DfT. The concession model appears to my mind, at least, reward a bidder who will run an agreed service for the lowest price. i.e. one drives prices up the other may bring costs down
I wholeheartedly agree - although there are still shareholders!!
 

Manchester77

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If DOR is allowed to bid for contracts in this country I wonder whether it'd be allowed to bid for foreign transport contracts as we've seen Arriva (DB) and MTR (just won Crossrail and operate LO with Arriva) do in this country?
 

Moonshot

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If DOR is allowed to bid for contracts in this country I wonder whether it'd be allowed to bid for foreign transport contracts as we've seen Arriva (DB) and MTR (just won Crossrail and operate LO with Arriva) do in this country?

Our private sector does that .....
 

dstrat

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All of you talking about risk. Have we just ignored the collosal sums that were handed out to the banks?

Unless you have complete economic meltdown, which if this happened there would be greater things to worry about, the railways are likely to be an asset that overtime will grow in its passenger potential. Arguably, the 'risk' it poses falls out of the realm of being a gamble.

Now, let me pose the situation of current. Please scan down this list here and look at the subsidy given to operators:

https://www.gov.uk/government/publications/rail-subsidy-per-passenger-mile

Whenever you pay a subsidy to a private operator, the whole point of privatising your service has FAILED. You are STILL bearing the responsibility for paying for the service.

Now, lets compound this by something else. Look at the subsidy being paid to Northern Rail. With that information in mind, take a look at 2011 profits (as per the big publication in Yorkshire citing profits ending Jan '11). Profits UP 34% to £40.1 million. And please tell me what Northern have done with these accumulated profits year-by-year?

Does that sound to anybody like a system that is working? No - of course not. Bring it all exclusively into the public's hands. Run the railway for the passenger, the worker and to the best for the public purse. Non of this nonsense where money can be spirited off elsewhere should be allowed to happen.
 

Moonshot

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All of you talking about risk. Have we just ignored the collosal sums that were handed out to the banks?

Unless you have complete economic meltdown, which if this happened there would be greater things to worry about, the railways are likely to be an asset that overtime will grow in its passenger potential. Arguably, the 'risk' it poses falls out of the realm of being a gamble.

Now, let me pose the situation of current. Please scan down this list here and look at the subsidy given to operators:

https://www.gov.uk/government/publications/rail-subsidy-per-passenger-mile

Whenever you pay a subsidy to a private operator, the whole point of privatising your service has FAILED. You are STILL bearing the responsibility for paying for the service.

Now, lets compound this by something else. Look at the subsidy being paid to Northern Rail. With that information in mind, take a look at 2011 profits (as per the big publication in Yorkshire citing profits ending Jan '11). Profits UP 34% to £40.1 million. And please tell me what Northern have done with these accumulated profits year-by-year?

Does that sound to anybody like a system that is working? No - of course not. Bring it all exclusively into the public's hands. Run the railway for the passenger, the worker and to the best for the public purse. Non of this nonsense where money can be spirited off elsewhere should be allowed to happen.

Which money has been spirited off elsewhere?
 

Bald Rick

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Whenever you pay a subsidy to a private operator, the whole point of privatising your service has FAILED. You are STILL bearing the responsibility for paying for the service.

Does that mean that the privately operated, but subsidised, air services, bus routes, school taxis, meals on wheels, care homes, hospital catering, post offices, etc etc are failures? Thought not.
 

dstrat

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Which money has been spirited off elsewhere?

Those companies behind the TOCs that are floated on stock exchanges, report profits (at the expense of who?) and divest this amongst those who have the money in the first place to invest in order to create more.

Does that mean that the privately operated, but subsidised, air services, bus routes, school taxis, meals on wheels, care homes, hospital catering, post offices, etc etc are failures? Thought not.

They have failed in the sense that the private market has been able to provide them financially in solitude, away from taxpayer's monies.

In an industry such as rail, you would have thought you would bring in a private entity to run the operation to reduce the burden on the tax payer. Well, if you are paying an operator ABOVE AND BEYOND the cost it requires to run their operation (and you are if they are reporting 10s of millions of pounds of profit!!) then that can hardly be considered efficiency can it. It is utter lunacy that we pay subsidies to these TOCs that report profits as they do.

There are of course, certain things that are provided as a public good for social or moral reasons that do not make money and will always need to be subsidised if you subscribe to any basic set of morals such as healthcare for all etc. - i.e. hospitals and medical care.
 

Moonshot

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Those companies behind the TOCs that are floated on stock exchanges, report profits (at the expense of who?) and divest this amongst those who have the money in the first place to invest in order to create more.



They have failed in the sense that the private market has been able to provide them financially in solitude, away from taxpayer's monies.

In an industry such as rail, you would have thought you would bring in a private entity to run the operation to reduce the burden on the tax payer. Well, if you are paying an operator ABOVE AND BEYOND the cost it requires to run their operation (and you are if they are reporting 10s of millions of pounds of profit!!) then that can hardly be considered efficiency can it. It is utter lunacy that we pay subsidies to these TOCs that report profits as they do.

There are of course, certain things that are provided as a public good for social or moral reasons that do not make money and will always need to be subsidised if you subscribe to any basic set of morals such as healthcare for all etc. - i.e. hospitals and medical care.

Are you saying its wrong to pay shareholders dividends?
 

dstrat

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No problem at all when it involves goods or services not considered critical to the fabric of a country.

So Ford or BMW can pay whatever they want to their shareholders as far as I'm concerned - as they could not be considered 'critical infrastructure'.

So by your line of thinking..are you saying you believe that rail is a dispensable asset that can be used first and foremost as a financial investment as opposed to providing service?
 
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LNW-GW Joint

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No problem at all when it involves goods or services not considered critical to the fabric of a country.
So Ford or BMW can pay whatever they want to their shareholders as far as I'm concerned - as they could not be considered 'critical infrastructure'.
So by your line of thinking..are you saying you believe that rail is a dispensable asset that can be used first and foremost as a financial investment as opposed to providing service?

Rail stopped being indispensible in the UK in the 1950s, when everybody rushed out and bought cars.
To survive they have to compete with the car, principally.
That's harder in Northern-land than it is in the congested south east.
 

Bald Rick

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No problem at all when it involves goods or services not considered critical to the fabric of a country.

So Ford or BMW can pay whatever they want to their shareholders as far as I'm concerned - as they could not be considered 'critical infrastructure'.

What about Supermarkets? Or Vodafone? Or BP? All pretty critical to how the country operates.
 

daikilo

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Rail stopped being indispensible in the UK in the 1950s, when everybody rushed out and bought cars.
To survive they have to compete with the car, principally.
That's harder in Northern-land than it is in the congested south east.

LNW-GW. Really?

That is a very interesting conjecture as I suggest the large majority of London commuters see rail as the only solution to get to their day job. And there are other cities in a similar situation.
 

dstrat

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Maybe I should have not have used the word 'critical' and rather very important infrastructure.

However, the car often isn't the preferable option for those in big cities. If we subscribe to London being 'a powerhouse' of the UK economy and that it would be inaccessible by car in consideration of the volume of people that would try to access it....that makes it a critical piece of infrastructure.

What about Supermarkets? Or Vodafone? Or BP? All pretty critical to how the country operates.

Well that raises another question in itself I guess. If we take the example of supermarkets, it is not as if they really do wage price wars and drive each other's prices down. In fact, across the board probably a fairly level playing field is kept to and at the worst, collusion and engaging in price fixing takes place (see the recent milk price fixing 'scandal of the big players that came out).

Those refining crude as well arguably do not fall into the category of heavily competing on price when we take into consideration the year-on-year profits accumulated by the relevant firms.

My old days in economics taught me this. The private market has its worth because as many companies compete against each other, they drive prices down to the point where profits (or rather 'super-normal' as they call it) are nil. The only profits that are made, are 'transient relative efficiencies', whereby one firm may have had a cull of a staff for instance that beefed up its bottom line. But in the long run, an efficient market has nobody making profits.

When you have firms making millions upon millions of pounds; you begin to understand that the private market theory ain't all its cracked up to be. Unfortunately, when players grow large, they accumulate power and are able to charge enough to make a profit, simply because, they can.

A 'fair' economy (to the majority, rather than the few with the £) would seek to ensure 'public' or 'necessary' goods are delivered in the most efficient manner possible. The principle of any profit-driven company DIRECTLY CONTRADICTS against that, as the primary motive is to generate profit to divest generally to the owners.
 

LNW-GW Joint

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LNW-GW. Really?
That is a very interesting conjecture as I suggest the large majority of London commuters see rail as the only solution to get to their day job. And there are other cities in a similar situation.

Well, that was my point about south east congestion.
Even so, it has taken a long time for NSE to get rehabilitated as a prospering business.
It took years for BR to get permission to electrify out of St Pancras and King's Cross, and Marylebone nearly ended up as a bus station.
Paddington is only now getting its long-term investment.

Regional is still in difficulty, without the endemic congestion and long-distance high-fare commuters of NSE.
Most businesses in the north have large car parks and the roads are driveable in the peak.
People still expect to drive to work, whereas in NSE they expect to take the train.
I know people living within a stone's throw of the Metrolink station at Altrincham who commute to Manchester by car and have never set foot on a tram.
 

Wavertreelad

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Rail stopped being indispensible in the UK in the 1950s, when everybody rushed out and bought cars.
To survive they have to compete with the car, principally.
That's harder in Northern-land than it is in the congested south east.

And thinking back to the 1960's and 1970 look how much money the British Motor industry took off the government of the day to subsidise their industry, British Leyland and all the variants of it for example and where did that get us?

The present system may not be perfect and could probably be improved, but as long as public money is being used to subsidise services, there has to be some means of either regulating and monitoring how these funds are accounted for.
 

Moonshot

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No problem at all when it involves goods or services not considered critical to the fabric of a country.

So Ford or BMW can pay whatever they want to their shareholders as far as I'm concerned - as they could not be considered 'critical infrastructure'.

So by your line of thinking..are you saying you believe that rail is a dispensable asset that can be used first and foremost as a financial investment as opposed to providing service?

But rail is providing a service....to record numbers of passengers. The fact that the front line of that service is being provided by the private sector isnt really an issue to the passenger, yet it seems to get the goat of some people who seem to think its unfair that the private sector shouldnt make a profit from providing that service. Would you consider electric gas and water supply critical infrastructure? If so , isnt it true that consumers now have a choice of who to take that supply from? Isnt it true that back the old days of state run industries, the state itself was subsidising them? isnt it true that the likes of the Electric, gas and Water Companies now make profits on which they pay corporation tax ?

Isnt it also true that anyone can buy shares in the likes of Stagecoach and First Group......including their own staff who can often purchase at a discount through Save As You Earn Schemes? Isnt it right that employees can benefit knowing that they have contributed to the success story that has been rail over the last 12 years or so?
 

Dave1987

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Those companies behind the TOCs that are floated on stock exchanges, report profits (at the expense of who?) and divest this amongst those who have the money in the first place to invest in order to create more.

They have failed in the sense that the private market has been able to provide them financially in solitude, away from taxpayer's monies.

In an industry such as rail, you would have thought you would bring in a private entity to run the operation to reduce the burden on the tax payer. Well, if you are paying an operator ABOVE AND BEYOND the cost it requires to run their operation (and you are if they are reporting 10s of millions of pounds of profit!!) then that can hardly be considered efficiency can it. It is utter lunacy that we pay subsidies to these TOCs that report profits as they do.

There are of course, certain things that are provided as a public good for social or moral reasons that do not make money and will always need to be subsidised if you subscribe to any basic set of morals such as healthcare for all etc. - i.e. hospitals and medical care.

Well firstly the subsidies you talk about are paid because the relevant TOC's run at a loss as they run services that cost more to run than they get in ticket revenue. That would not change under nationalisation.

Secondly if you have total nationalisation, day to day running costs come under the treasury and you def don't want that.
--- old post above --- --- new post below ---
Maybe I should have not have used the word 'critical' and rather very important infrastructure.

However, the car often isn't the preferable option for those in big cities. If we subscribe to London being 'a powerhouse' of the UK economy and that it would be inaccessible by car in consideration of the volume of people that would try to access it....that makes it a critical piece of infrastructure.



Well that raises another question in itself I guess. If we take the example of supermarkets, it is not as if they really do wage price wars and drive each other's prices down. In fact, across the board probably a fairly level playing field is kept to and at the worst, collusion and engaging in price fixing takes place (see the recent milk price fixing 'scandal of the big players that came out).

Those refining crude as well arguably do not fall into the category of heavily competing on price when we take into consideration the year-on-year profits accumulated by the relevant firms.

My old days in economics taught me this. The private market has its worth because as many companies compete against each other, they drive prices down to the point where profits (or rather 'super-normal' as they call it) are nil. The only profits that are made, are 'transient relative efficiencies', whereby one firm may have had a cull of a staff for instance that beefed up its bottom line. But in the long run, an efficient market has nobody making profits.

When you have firms making millions upon millions of pounds; you begin to understand that the private market theory ain't all its cracked up to be. Unfortunately, when players grow large, they accumulate power and are able to charge enough to make a profit, simply because, they can.

A 'fair' economy (to the majority, rather than the few with the £) would seek to ensure 'public' or 'necessary' goods are delivered in the most efficient manner possible. The principle of any profit-driven company DIRECTLY CONTRADICTS against that, as the primary motive is to generate profit to divest generally to the owners.

So you are saying that ANY company that exists to make a profit is morally wrong or something along those lines? Have you seen how the world works? The world is not made up of mutuals you know! In fact one pretty large mutual in this country was found to be corrupt! You seem to think its a sin for any company to run to make a profit, let alone if that company provides a service to transport people.
 

NSEFAN

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Dave1987 said:
if you have total nationalisation, day to day running costs come under the treasury and you def don't want that.
NR's £30bn debt is being included in the government's debt from September, I believe? My cynical side wonders if this has been done now to justify further austerity. :roll:

Dave1987 said:
So you are saying that ANY company that exists to make a profit is morally wrong or something along those lines? Have you seen how the world works? The world is not made up of mutuals you know! In fact one pretty large mutual in this country was found to be corrupt! You seem to think its a sin for any company to run to make a profit, let alone if that company provides a service to transport people.
I think the objection here is that since the service cannot exist without subsidy, it should not be run to make any kind of profit and hence should not be in private hands. The profit paid to shareholders is just another cost to the government, since the service can theoretically be run by a not-for-profit state-owned company rather than a private entity. Of course, this doesn't account for how the system is actually run: the private sector can be very efficient but the railways in their pseudo-private-public mess leave a lot to be desired!

There is also a more general point about how much profit should be made from a service, which affects us all when a private company is paid directly by the state. One problem which seems to exist is that the government is bad at haggling and doesn't fight hard enough to drive down costs to the taxpayer when it outsources services. The recent IEP fiasco is a classic example of this. I don't mind private companies providing services for the government, provided they are good value and we're not being taken for a ride!
 

Moonshot

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NR's £30bn debt is being included in the government's debt from September, I believe? My cynical side wonders if this has been done now to justify further austerity. :roll:


I think the objection here is that since the service cannot exist without subsidy, it should not be run to make any kind of profit and hence should not be in private hands. The profit paid to shareholders is just another cost to the government, since the service can theoretically be run by a not-for-profit state-owned company rather than a private entity. Of course, this doesn't account for how the system is actually run: the private sector can be very efficient but the railways in their pseudo-private-public mess leave a lot to be desired!

There is also a more general point about how much profit should be made from a service, which affects us all when a private company is paid directly by the state. One problem which seems to exist is that the government is bad at haggling and doesn't fight hard enough to drive down costs to the taxpayer when it outsources services. The recent IEP fiasco is a classic example of this. I don't mind private companies providing services for the government, provided they are good value and we're not being taken for a ride!

The point about " haggling " actually came up in the inquiry into the West Coast Franchise issue. But in general, government contracts are put out to tender with lowest bid winning.

You are right about Network Rails debt being re classified, but I rather think that NR itself may well be privatised in the not too distant future.
 

NSEFAN

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Moonshot said:
You are right about Network Rails debt being re classified, but I rather think that NR itself may well be privatised in the not too distant future.
In that case I pray that we don't return to the dark days of Railtrack :(
 

Moonshot

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In that case I pray that we don't return to the dark days of Railtrack :(


Indeed, but as you point out, the cynical reason for re classifying NRs debt may indeed be to justify austerity, and I rather think that you have a very good point. Putting it in the private sector removes plotical interference for that very reason.
 

LNW-GW Joint

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Indeed, but as you point out, the cynical reason for re classifying NRs debt may indeed be to justify austerity, and I rather think that you have a very good point. Putting it in the private sector removes plotical interference for that very reason.

The government didn't really want the NR debt back on its books, but the audit commission wouldn't budge.
But now it is on the Treasury's books they will surely exert greater control.
Austerity is an odd thing. The railway has been largely exempt in this recession so far because of the franchise system, and subsidies are now under pressure at each renewal.
BR would have wielded the axe long ago (under government pressure).
Meanwhile the recent NR CP5 settlement was quite generous under the prevailing conditions, partly because capital spend needs to be kept high.
 
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