Proposal for public sector bidders in Scotland

[tbtc]

Interesting if unlikely. I have long said there should be an open, transparent and equal real world comparison between public and private ownership models to determine, once and for all, which is best.

Sounds great in theory, but there needs to be a suitable "public" body to bid for it.

Realistically, which public bodies have the spare resources and spare money to spend £5m on putting together a bid (taking several months, having lawyers prepare water-tight contracts/ commitments)?

How much can they afford to take their eye off the "day job" of running boats/ the subway/ buses?

How do CalMac/ SPT/ Lothian Buses find the £5m from their existing cost bases if the bid fails?

Stagecoach might be able to take those kind of risks, because they can bid for several TOCs each year - if you only win every fourth bid then you know that losing £5m is a risk you have to factor into your margins.

Since CalMac/ SPT/ Lothian Buses aren't going to be bidding for any franchises south of the border, they face spending £5m once every five/ seven/ ten years (depending on how long the next franchise is awarded for), which means they could see a big hole in the budget for a few years. Sorry, no new buses in Edinburgh for five years and cutbacks to evening services because we spent £5m bidding to play trains?

Maybe in an ideal world bids wouldn't cost so much, maybe in an ideal world we'd have kept some kind of public bodies in the '90s able to fund such bids, maybe lots of things... but, realistically, I can't see how it would work.

Sounds good in press releases, will play well with certain voters, looks good if our politicians are knocking the private sector, I'm not defending all of it's excesses, but the only way I could see the public sector bid working is if you rig the process so that they automatically win.

And then you get into the arguments like whether the "public sector" drivers/ guards are subject to the same public sector pay freezes/ pension reform etc... it's not a magic bullet.

 

[DarloRich]

Sounds great in theory, but there needs to be a suitable "public" body to bid for it.

Realistically, which public bodies have the spare resources and spare money to spend £5m on putting together a bid (taking several months, having lawyers prepare water-tight contracts/ commitments)?

How much can they afford to take their eye off the "day job" of running boats/ the subway/ buses?

How do CalMac/ SPT/ Lothian Buses find the £5m from their existing cost bases if the bid fails?

Stagecoach might be able to take those kind of risks, because they can bid for several TOCs each year - if you only win every fourth bid then you know that losing £5m is a risk you have to factor into your margins.

Since CalMac/ SPT/ Lothian Buses aren't going to be bidding for any franchises south of the border, they face spending £5m once every five/ seven/ ten years (depending on how long the next franchise is awarded for), which means they could see a big hole in the budget for a few years. Sorry, no new buses in Edinburgh for five years and cutbacks to evening services because we spent £5m bidding to play trains?

Maybe in an ideal world bids wouldn't cost so much, maybe in an ideal world we'd have kept some kind of public bodies in the '90s able to fund such bids, maybe lots of things... but, realistically, I can't see how it would work.

Sounds good in press releases, will play well with certain voters, looks good if our politicians are knocking the private sector, I'm not defending all of it's excesses, but the only way I could see the public sector bid working is if you rig the process so that they automatically win.

And then you get into the arguments like whether the "public sector" drivers/ guards are subject to the same public sector pay freezes/ pension reform etc... it's not a magic bullet.

so just accept that private companies must run rail for ever more?

Surely the entrepreneurial, agile, flexible, capitalist supermen of the private sector have nothing to fear from the bloated, slow, inefficient, lazy, public sector. They would win easily. Wouldn't they? I just want a way to end this argument once and for all. Which is best? Public or private. Lets commission an independent report on a public sector franchise & a similar private sector one and see.

None of the issues you suggest are insurmountable ( the hardest actually being the finding of the cash) I would suggest setting up an arms length company and transferring in or buying in suitable resource to run those companies along with an increased budget to allow for a bid. That way the risk is on the government body suggesting the idea.

We have just found £1bn to buy of the DUP. £5m is nowt.

 

[LNW-GW Joint]

As far as I van see, CalMac is a commercial company owned by SG.
If they were to win the Scotrail franchise they would need a return to make it worth their while.
How is that any different to Abellio operating it?
Nobody does these things for free, even in the public sector.
There would also need to be financial firewalls between SG, CalMac and Scotrail, to keep everyone honest.
Same with any other SG-owned body.

 

[DarloRich]

As far as I van see, CalMac is a commercial company owned by SG.
If they were to win the Scotrail franchise they would need a return to make it worth their while.
How is that any different to Abellio operating it?
Nobody does these things for free, even in the public sector.
There would also need to be financial firewalls between SG, CalMac and Scotrail, to keep everyone honest.
Same with any other SG-owned body.

I take the point but if run as a not for dividend company that profit goes back into the system. Is that not a good thing?

 

[F Great Eastern]

That's pretty much the reality for many/most of the present UK rail franchises services anyway isn't it ?

At least the franchise comes up for renewal and they can be chucked out of it and to re-bid they have to meet commitments and make an offer of what they are going to do in order to stay in power etc, therefore they can't completely rest on their laurels.

If they just continue and it's not subject to tendering and automatically it keeps going without any challenge, there is no incentive to improve services or innovate, because if you do or you don't, there really isn't any difference because nothing bad can happen.

The problem when things just carry on the way they are with one operator no matter what for 30/40/50 years and there is no service development, something that I have seen in many industries, not just in transport.

You will be amazed to see how many companies didn't improve elements of their product for 20 years despite calls for it, yet as soon as they faced some competition suddenly found the ability to innovate.

It's like my supermarket down the road, the shop hadn't been invested in during 20 years and was only open 9am to 6pm and had higher prices, no delivery service, no fresh produce and various customer service failings and long queues at checkouts, people didn't have a choice.

Then another supermarket opened (that they opposed) and suddenly almost overnight the original supermarket extended their opening hours from 8am to 9pm, reduced prices, staff worked harder, more people were on the tills, they started offering delivery and their products much improved.

The later would never have happened if it wasn't for competition, they had to adapt and innovate and improve their services to the public to survive, before they had a monopoly and a captive market and set the rules and if the public didn't like it that was just tough.

 

[Railsigns]

At least the franchise comes up for renewal and they can be chucked out of it and to re-bid they have to meet commitments and make an offer of what they are going to do in order to stay in power etc, therefore they can't completely rest on their laurels.

If they just continue and it's not subject to tendering and automatically it keeps going without any challenge, there is no incentive to improve services or innovate, because if you do or you don't, there really isn't any difference because nothing bad can happen.

Well that's odd, because British Rail's Research Division contributed genuine innovation to the industry over many years, eclipsing the supposed innovation we're told the private sector brings to the industry, and without the high cost of regular franchise competitions.

 

[thenorthern]

Regarding if SPT put in a bid even if services in Edinburgh got better and SPT services stayed the same I think Edinburgh city council would complain.

I don't think it would work to have a rail Scottish rail operator owned by local authorities that only cover part of Scotland.

 

[IanXC]

Can I remind members that this thread is for discussion of the Scottish Government's proposal for a public sector bid for the next ScotRail franchise. General discussion of nationalisation versus privatisation is off topic.

 

[AngusH]

I think maybe it could work if the Scottish government could somehow get the bidding cost down.

100,000 might be doable for a large public body, but 5m is too much for something that isn't certain.

 

[47271]

I think maybe it could work if the Scottish government could somehow get the bidding cost down.

100,000 might be doable for a large public body, but 5m is too much for something that isn't certain.

Especially considering that Abellio only manages £12m pa profit from Scotrail. If that's all that's going to be freed up by taking the operator out of the private sector, and assuming that all other costs stay the same, then there's not much in the way of a financial argument.

The saving would just about pay for the ultra basic Kintore station for example, unless the cost of that has shot up since the last time I looked. Everything else on the Aberdeen-Inverness scheme has under Network Rail, so I imagine Kintore has too.

However, if we believe that the Scottish Government can exert far greater control for the public good than it's able to achieve via Transport Scotland's supervision of Abellio, and infrastructure is in the mix in a way that it's managed more effectively than by NR (such as between Aberdeen and Inverness, ha ha), then the elimination of an insignificant commercial profit is neither here nor there.

I'm ready to believe it, but let's see...

 

[Fishplate84]

"Especially considering that Abellio only manages £12m pa profit from Scotrail. If that's all that's going to be freed up by taking the operator out of the private sector, and assuming that all other costs stay the same, then there's not much in the way of a financial argument. "

Doesn't that highlight the pointlessness of it? Rail franchising is a mature market, all the fat has been taken out of it and the operators make a tiny % margin on running them - and that's mostly very experienced transport groups and other national rail companies these days.

What could a state bid offer? £12m of margin would get lost in the roundings. You'd trade a potential experienced rail operator for a bunch of quasi-civil servants who've never run a train service in their lives?

It doesn't sound like a recipe for delivering a quality service at all, and no doubt the unions would love it as politicians are very sensitive to negative publicity of their own failings. With a private franchise company, the Minister can make bold statements and be seen to be acting. When it's his own company, or one very close politically, my bet is poor performance would be tolerated, and escalating costs swept under the carpet. There's no political incentive to be seen to be taking tough decisions to run an effective railway.

It's not obvious what a public sector operator would be able to deliver better than a private one, other than capitulating to every union demand, of which there would be many without doubt. So a £6b Scotrail annual bill becomes a £6.5b - £7b one before long for delivering much the same. Good old taxpayer.

If Scottish Government wanted to pay people more, or employ more people, or run more services or do more things than Abellio does now, all it has to do is ask and pay up under the current contract anyway.

 

[tspaul26]

I take the point but if run as a not for dividend company that profit goes back into the system. Is that not a good thing?

Not necessarily. Excessive retained profit can cause issues with the accounting ratios, especially if the company does not have enough debt on the balance sheet.

In any event, I suspect that any surplus would not be allowed to remain with ScotRail: it would either be dealt with as a 'saving' in the press release or, more likely in my view, spent on something else by the Scottish Government.

 

[Highland37]

Not necessarily. Excessive retained profit can cause issues with the accounting ratios, especially if the company does not have enough debt on the balance sheet.

In any event, I suspect that any surplus would not be allowed to remain with ScotRail: it would either be dealt with as a 'saving' in the press release or, more likely in my view, spent on something else by the Scottish Government.

I don't think they could do that directly but maybe prune it off the subsidy in the future.

I think the SG's proposals are to be welcomed. It shows long term vision, as it wont happen tomorrow, and builds on the successful model of Calmac.

I use Calmac frequently and it's an excellent service. I do see where many of the comments regarding excess costs come from but ferries are not cheap to operate. Overall, the SG has been very good for Calmac and the islands.

I think Abellio are doing an ok job too though. Their customer relations are awful and evasive but that is more to do with the culture than who owns it.

There is also a political reality - in these political times, I think it more likely that any party bidding for power would be able to promise and deliver more with direct control of the operator.

The other side to that is they take direct blame when things don't go so well.

 

[Railsigns]

It's not obvious what a public sector operator would be able to deliver better than a private one, other than capitulating to every union demand, of which there would be many without doubt. So a £6b Scotrail annual bill becomes a £6.5b - £7b one before long for delivering much the same. Good old taxpayer.

Where on Earth are you getting your figures from?

A £6 bn annual subsidy is enough to fund the entire GB rail system (although British Rail managed with less than £2 bn at today's prices, despite "capitulating to every union demand").

 

[takno]

It's not obvious what a public sector operator would be able to deliver better than a private one, other than capitulating to every union demand, of which there would be many without doubt.

I can't see any evidence that capitulating to union demands is a habit of the public sector at all. BR sat out plenty of strikes with nothing much moving nationally for days at a time where subsequently private sector operators have capitulated quickly (and probably rightly in a lot of cases). More recently I can't remember a public sector strike in the last 20 years which has actually led to any movement. In fact prior to the current government's wrecking-ball approach the public sector had led on good industrial relations with pay rises largely set by independent commissions.

 

[thenorthern]

This may seem a mad idea but would there be any logic in splitting the Scotrail and SPT sponsored services into two franchises. Effectively making it so that SPT awarded the franchise on the same basis that TfL awards the London Overground franchise and how Merseytravel awards the Merseyrail franchise.

 

[Altnabreac]

This may seem a mad idea but would there be any logic in splitting the Scotrail and SPT sponsored services into two franchises. Effectively making it so that SPT awarded the franchise on the same basis that TfL awards the London Overground franchise and how Merseytravel awards the Merseyrail franchise.

Effectively something along those lines happened before 2006 but rail was removed from SPT because it wasn't actually a very logical arrangement for lots of the services that cross the SPT boundary.

Fares across the old boundary are still full of oddities because of historic pricing differences. With more services like Airdrie - Bathgate and the planned Cumbernauld - Edinburgh services it would make even less sense to bring back an SPT based franchise.

 

[takno]

This may seem a mad idea but would there be any logic in splitting the Scotrail and SPT sponsored services into two franchises. Effectively making it so that SPT awarded the franchise on the same basis that TfL awards the London Overground franchise and how Merseytravel awards the Merseyrail franchise.

It depends if you think there is any logic in the way LO or Merseytravel are run . Given that many of the Glasgow suburban services actually run as far as Edinburgh, and are often not primarily used for access to Glasgow I don't see them hanging together particularly well as an independent network. SPT also doesn't have a cohesive local transport network to integrate the trains into in the same way as the overground

You might be able to make a better case for splitting off central belt services from the ones heading north, particularly once the main routes there are being run by HSTs and seem more like an intercity operation.

 

[gsnedders]

It depends if you think there is any logic in the way LO or Merseytravel are run . Given that many of the Glasgow suburban services actually run as far as Edinburgh, and are often not primarily used for access to Glasgow I don't see them hanging together particularly well as an independent network. SPT also doesn't have a cohesive local transport network to integrate the trains into in the same way as the overground

I mostly agree with that; SPT would only make sense if there was a separate network, but it doesn't. I seem to remember some manifesto commitment (maybe in the local election?) from the SNP to introduce an "Oyster-like" ticketing system on all public transport in the Glasgow area which would start to make SPT more useful, though that still wouldn't actually require them to be a TOC (after all, Oyster is valid on plenty of non-TfL operated TOCs!).

 

[takno]

I mostly agree with that; SPT would only make sense if there was a separate network, but it doesn't. I seem to remember some manifesto commitment (maybe in the local election?) from the SNP to introduce an "Oyster-like" ticketing system on all public transport in the Glasgow area which would start to make SPT more useful, though that still wouldn't actually require them to be a TOC (after all, Oyster is valid on plenty of non-TfL operated TOCs!).

I reckon by the time they'd got something like that rolled out in Glasgow Lothian will have taken over all the non-Glasgow bus operations in the central belt, and will be running their own competing system. In fact the best course of action would probably be for all the individual operators to roll out a contactless solution (Scotrail could do it, with the proviso that advances and discounted fares like XC to Glasgow are paper-only), and then get them talking about capping later.

 

[thenorthern]

There is something about the SNP and trains that I don't like, with many of the devolution things with trains they seem to be doing things simply because they can. In my mind the Scottish Government should try and keep constancy with everything to do with trains across the British Rail network but they don't.

I know with trains north of Edinburgh there were plans by the SNP a couple of years ago to force cross-border trains to terminate at Edinburgh or Glasgow so effectively preventing CrossCountry and Virgin Trains East Coast services from running to Aberdeen, Inverness and Dundee. They didn't mention the sleeper trains though surprisingly. The plan was dropped when it was found out that people north of the border were happy with the cross border trains they were getting.

http://www.telegraph.co.uk/news/pol...cross-Border-trains-to-stop-at-Edinburgh.html

 

[route:oxford]

This could get very interesting if the Scottish Government are both running services and controlling paths.

There will be enough spare HST sets out there for a group of private-sector operators to take a chance with a few Open-Access operations in Scotland and undercut the local monopoly between key destinations.

There aren't many routes that would make money. Glasgow Queen Street to Edinburgh being the main one. I suspect a Stirling to Glasgow shuttle would turn a profit too.

 

[Clansman]

There aren't many routes that would make money. Glasgow Queen Street to Edinburgh being the main one. I suspect a Stirling to Glasgow shuttle would turn a profit too.

Lockerbie is a relatively untapped opportunity I reckon, but I agree with you that there aren't many opportunities up here.

 

[gsnedders]

This could get very interesting if the Scottish Government are both running services and controlling paths.

There will be enough spare HST sets out there for a group of private-sector operators to take a chance with a few Open-Access operations in Scotland and undercut the local monopoly between key destinations.

There aren't many routes that would make money. Glasgow Queen Street to Edinburgh being the main one. I suspect a Stirling to Glasgow shuttle would turn a profit too.

The problem there is that most profitable routes are already path/station limited.

 

[Marklund]

Personally I'm all for it but they absolutely must take Network Rail Scotland under their ownership as well for it to stand any chance of working.

With the amount of central services the territories buy in? That's where it gets costly, and that'll wipe out any cost savings just buying the first TRU!

 

[47271]

With the amount of central services the territories buy in? That's where it gets costly, and that'll wipe out any cost savings just buying the first TRU!

Sorry, I don't have a clue what any of this means?

 

[Highland37]

There is something about the SNP and trains that I don't like, with many of the devolution things with trains they seem to be doing things simply because they can. In my mind the Scottish Government should try and keep constancy with everything to do with trains across the British Rail network but they don't.

I know with trains north of Edinburgh there were plans by the SNP a couple of years ago to force cross-border trains to terminate at Edinburgh or Glasgow so effectively preventing CrossCountry and Virgin Trains East Coast services from running to Aberdeen, Inverness and Dundee. They didn't mention the sleeper trains though surprisingly. The plan was dropped when it was found out that people north of the border were happy with the cross border trains they were getting.

http://www.telegraph.co.uk/news/pol...cross-Border-trains-to-stop-at-Edinburgh.html

It's the Telegraph - ignore anything they say about the SNP. SNPbaaaaad remember.

I am glad the SNP have been in power. Calmac is a thousand times better and so are the trains, in general.

I work to a fairly common principle - the people living in a country should elect politicians that that have the power to influence all matters in that country.

 

[Railsigns]

It's the Telegraph - ignore anything they say about the SNP. SNPbaaaaad remember.

I am glad the SNP have been in power. Calmac is a thousand times better and so are the trains, in general.

Their record on re-opening railways or building completely new ones has been abysmal, however.

They've shown that they're good at cancelling such projects inherited from the previous administration at Holyrood but have yet to legislate for a single equivalent project during the ten years they've been in power. The previous Lab-Lib coalition held power for just eight years but approved legislation for six rail openings/re-openings during that time (seven, if you include Edinburgh Trams).

 

[takno]

I am glad the SNP have been in power. Calmac is a thousand times better and so are the trains, in general.

There are basically much the same trains, mostly running in much the same service patterns. Everything is just 10 years older.

 

[thenorthern]

I wonder if public sector bids will be offered for the sleeper service as well.

It's the Telegraph - ignore anything they say about the SNP. SNPbaaaaad remember.

I am glad the SNP have been in power. Calmac is a thousand times better and so are the trains, in general.

I work to a fairly common principle - the people living in a country should elect politicians that that have the power to influence all matters in that country.

It was in the BBC as well.

http://www.bbc.co.uk/news/uk-scotland-17521070

http://www.bbc.co.uk/news/uk-scotland-scotland-politics-18521032

Currently with cross border trains north of Edinburgh each day there are 6 to Aberdeen, 2 to Dundee, 1 to Fort William, 2 to Inverness and 1 to Stirling I think but it would be a bit strange to suggest to remove them to try and get more people using ScotRail.