Rail Franchises to be Replaced with Fixed Fee Contracts

[dk1]

I suspect you are talking about the battle rather than the war. The war is most certainly not even in it's main phase yet.

Sounds very Dads Army

 

[theironroad]

Sounds very Dads Army

Don't tell them your name Pike....

 

[Starmill]

I suspect you are talking about the battle rather than the war. The war is most certainly not even in it's main phase yet.

Exactly. The fact that the Committee even called him to give evidence demonstrates that.

People thinking that nothing much is going to change on the railway reminds me of people thinking that nothing much is going to change when the Transition period ends. They just haven't realised yet.

 

[moorw003]

Still nothing from my company. It's all a bit scary.

 

[Clarence Yard]

Surely this is a commercial discussion and therefore the discussions take as long as they take. Would the December 2019 driver training issue have been a change?

If it was caused by NR not allowing the training paths, probably yes.

Commercial discussions can take quite a bit of time but both bodies have deadlines for annual accounts/Treasury reporting so some accurate idea of the outcome is desirable. Agreeing Change also gives you both more certainty going forward.

 

[Bletchleyite]

Still nothing from my company. It's all a bit scary.

Why's it scary? The railway will not fully close down.

 

[Starmill]

Why's it scary? The railway will not fully close down.

A change of employers is quite possible if some of the contract holders have negotiated a termination with the Department. That's probably as serious as it gets in the immediate term.

 

[Bletchleyite]

A change of employers is quite possible if some of the contract holders have negotiated a termination with the Department. That's probably as serious as it gets in the immediate term.

Though because of TUPE the impact of it will be fairly limited, at least in the short term.

 

[dk1]

Still nothing from my company. It's all a bit scary.

No news is good news mate.

 

[BeHereNow]

If it was caused by NR not allowing the training paths, probably yes.

Commercial discussions can take quite a bit of time but both bodies have deadlines for annual accounts/Treasury reporting so some accurate idea of the outcome is desirable. Agreeing Change also gives you both more certainty going forward.

And it is presumably easier if the change is relatively small and the company / Department are in a strong financial position.

 

[dctraindriver]

Exactly. The fact that the Committee even called him to give evidence demonstrates that.

People thinking that nothing much is going to change on the railway reminds me of people thinking that nothing much is going to change when the Transition period ends. They just haven't realised yet.

What do you think will change?

 

[Starmill]

What do you think will change?

Delays to enhancements in infrastructure, fewer services for a period of up to five years, simpler timetables, more rolling stock being withdrawn and spending time off lease, and significant pressure to reduce current spending in all other areas. There may also be some desperation to increase yeild or protect revenue, but I wouldn't be surprised to find that numbers remain low enough that doing those is uneconomical.

 

[The Ham]

Delays to enhancements in infrastructure,

Yes, but probably more electrification.

fewer services for a period of up to five years, simpler timetables, more rolling stock being withdrawn and spending time off lease, and significant pressure to reduce current spending in all other areas. There may also be some desperation to increase yeild or protect revenue, but I wouldn't be surprised to find that numbers remain low enough that doing those is uneconomical.

I'm not so sure about this, by how much do you think that rail use will fall?

Whilst Covid-19 has reduced the use of rail, in not sure that it would last much beyond 6 months (depending on vaccine delivery times).

Whilst WFH will have an impact on how we travel that's likely to impact road use more than rail use (due to the high upfront costs of car ownership, with an average cost of over £3,000/year including purchase costs).

As such there's likely to be some shift away from car ownership which is likely to benefit the railways by there being more weekly and occasional rail travel.

Given that 50% of rail use is business related and 50% of jobs can be done remotely worst case is a 25% fall.

However, if 25% of people opt to or are required to work from the office 100% of the time then that's a 19% fall.

However even those who WFH are likely to go in some of the time, assuming the average that people WFH (and many are likely to do it a few days a week) is between 75% and 50% of the time then the fall in rail travel would be between 10-15%.

Even at a 20% fall in use that's reverting passenger numbers back to somewhere between 2010 and 2015 depending on the region/sector.

London is likely to be hit hardest, but then there's often a lot of overloaded (>120% full) trains. Which is likely to mean that there's then the ability for most to have a seat fairly easily rather than a lot of standing.

 

[Bald Rick]

Whilst Covid-19 has reduced the use of rail, in not sure that it would last much beyond 6 months (depending on vaccine delivery times).

I will bet you as much money as you want that rail revenue is below pre-Covid levels (inflation adjusted) until at least 2023.

Delays to enhancements in infrastructure, fewer services for a period of up to five years, simpler timetables, more rolling stock being withdrawn and spending time off lease, and significant pressure to reduce current spending in all other areas. There may also be some desperation to increase yeild or protect revenue, but I wouldn't be surprised to find that numbers remain low enough that doing those is uneconomical.

A pretty good assessment I’d say.

 

[Starmill]

Yes, but probably more electrification.



I'm not so sure about this, by how much do you think that rail use will fall?

Whilst Covid-19 has reduced the use of rail, in not sure that it would last much beyond 6 months (depending on vaccine delivery times).

Whilst WFH will have an impact on how we travel that's likely to impact road use more than rail use (due to the high upfront costs of car ownership, with an average cost of over £3,000/year including purchase costs).

As such there's likely to be some shift away from car ownership which is likely to benefit the railways by there being more weekly and occasional rail travel.

Given that 50% of rail use is business related and 50% of jobs can be done remotely worst case is a 25% fall.

However, if 25% of people opt to or are required to work from the office 100% of the time then that's a 19% fall.

However even those who WFH are likely to go in some of the time, assuming the average that people WFH (and many are likely to do it a few days a week) is between 75% and 50% of the time then the fall in rail travel would be between 10-15%.

Even at a 20% fall in use that's reverting passenger numbers back to somewhere between 2010 and 2015 depending on the region/sector.

London is likely to be hit hardest, but then there's often a lot of overloaded (>120% full) trains. Which is likely to mean that there's then the ability for most to have a seat fairly easily rather than a lot of standing.

I think we can all admire your longevity with regards to these arguments, but we've already addressed this, several times, elsewhere! I raised it here because I think we should all be able to agree that not much will survive unchanged. Of course maybe we can't and if so also fair enough...

 

[Bald Rick]

Whilst WFH will have an impact on how we travel that's likely to impact road use more than rail use (due to the high upfront costs of car ownership, with an average cost of over £3,000/year including purchase costs).

As such there's likely to be some shift away from car ownership which is likely to benefit the railways by there being more weekly and occasional rail travel.

Given that 50% of rail use is business related and 50% of jobs can be done remotely worst case is a 25% fall.

However, if 25% of people opt to or are required to work from the office 100% of the time then that's a 19% fall.

However even those who WFH are likely to go in some of the time, assuming the average that people WFH (and many are likely to do it a few days a week) is between 75% and 50% of the time then the fall in rail travel would be between 10-15%.

Even at a 20% fall in use that's reverting passenger numbers back to somewhere between 2010 and 2015 depending on the region/sector.

London is likely to be hit hardest, but then there's often a lot of overloaded (>120% full) trains. Which is likely to mean that there's then the ability for most to have a seat fairly easily rather than a lot of standing.

I really do hope you copy and paste this every time you post it. It must be a real chore if you type it out every time.

And, fundamentally, it is very, very, flawed logic as I explained somewhere.

 

[Efini92]

Oh how enjoyable it was to watch him in front of the select committee.

He got away with it though didn’t he? His arrogance was the main cause of the 2018 fiasco.
The railways will never improve whilst he’s at the helm or under DFT control for that matter.

 

[The Ham]

I will bet you as much money as you want that rail revenue is below pre-Covid levels (inflation adjusted) until at least 2023.

I don't disagree with that rail revenue will be below pre Covid-19 level for that timeframe (and probably more).

What I'm saying is that it's likely to be WFH which changes it going forwards (and it's likely to be lower) once there's there's a vaccine.

I'm also saying that from 2021 onwards it's likely to be up to 15% lower, and so we're unlikely to see massive cuts to rural lines (as passenger numbers are likely to hold up well there), what's likely to change is the need for significant enhancements to cater for the growth seen in the short term, especially in and around London.

In and around London travel into the London terminals could be down significantly (I've suggested 40% before) due to WFH.

However pre Covid-19 there were off peak services which had people standing on them, relatively few were likely to be work related and so that rail use would unlikely be hit too hard.

Whilst commuting brings in lots of money, it needs to be remembered that the daily cost of an annual season ticket is noticeably below that of even a monthly ticket.

Flexible season tickets are likely to be priced at the latter rather than the former and so what was costing £10/day would then cost £12/day. If you're only going to work 3 days a week that's £36 rather than £50 for full time, so you're seeing a saving of about £630 a year (plus cost of food and drink out that you may consume and the saving in childcare if you need that too) out of a cost of £2,250 previously.

That's a fall of 28% of revenue when the person has reduced their travel by 40%.

If you reduce your travel to a few times a month (unless it's all within one week) chances are you'll not be able to get much of a saving over the daily cost. If that is £15 then travel may have fallen by 90% but revenue had fallen by 84%.

With those sorts of limits in the falls in revenue a 20% fall in passenger numbers may only be a 15% fall in revenue.

However even if there was a 20% fall in revenue that's £2bn a year out of a total rail ticket income of £10bn, therefore with £11bn of expenditure (excluding enhancement costs) there wouldn't likely be sweeping cuts which many fear.

Even generating a 1% cut in expenses through some shorter services, especially for the London peak services (whilst London & SE travel make up the majority of rail use, shortening services from 12 to 8 coaches is likely to only save about 10%, and peak services are a part of all the services run hence the figure of 1%) would reduce the shortfall by 18%.

Yes that means cuts of >20% to get the subsidy back to pre Covid-19 levels, however. However with a need to be greener there's going to be costs with getting us off or carbon habit and so maybe a subsidy of £1.5bn next year (possibly cost to £1bn if the fall is less than 20%) with it falling back to the ~£300 million mark by 2030 might be an acceptable cost (typical value for the subsidy for the day to day running of the network, i.e. excluding enhancements).

It might even be possible to get it down faster if there's more electrification (and with a clearer picture of the costs of running diesel trains Vs electric trains the benefits of electrification might be better understood within government, but I won't hold my breath).

Whether it's £1.5bn or not, is fairly unlikely to be close to the £3.5bn which the railways have burned through in the last 6 months.

 

[Starmill]

I don't disagree with that rail revenue will be below pre Covid-19 level for that timeframe (and probably more).

What I'm saying is that it's likely to be WFH which changes it going forwards (and it's likely to be lower) once there's there's a vaccine.

I'm also saying that from 2021 onwards it's likely to be up to 15% lower, and so we're unlikely to see massive cuts to rural lines (as passenger numbers are likely to hold up well there), what's likely to change is the need for significant enhancements to cater for the growth seen in the short term, especially in and around London.

In and around London travel into the London terminals could be down significantly (I've suggested 40% before) due to WFH.

However pre Covid-19 there were off peak services which had people standing on them, relatively few were likely to be work related and so that rail use would unlikely be hit too hard.

Whilst commuting brings in lots of money, it needs to be remembered that the daily cost of an annual season ticket is noticeably below that of even a monthly ticket.

Flexible season tickets are likely to be priced at the latter rather than the former and so what was costing £10/day would then cost £12/day. If you're only going to work 3 days a week that's £36 rather than £50 for full time, so you're seeing a saving of about £630 a year (plus cost of food and drink out that you may consume and the saving in childcare if you need that too) out of a cost of £2,250 previously.

That's a fall of 28% of revenue when the person has reduced their travel by 40%.

If you reduce your travel to a few times a month (unless it's all within one week) chances are you'll not be able to get much of a saving over the daily cost. If that is £15 then travel may have fallen by 90% but revenue had fallen by 84%.

With those sorts of limits in the falls in revenue a 20% fall in passenger numbers may only be a 15% fall in revenue.

However even if there was a 20% fall in revenue that's £2bn a year out of a total rail ticket income of £10bn, therefore with £11bn of expenditure (excluding enhancement costs) there wouldn't likely be sweeping cuts which many fear.

Even generating a 1% cut in expenses through some shorter services, especially for the London peak services (whilst London & SE travel make up the majority of rail use, shortening services from 12 to 8 coaches is likely to only save about 10%, and peak services are a part of all the services run hence the figure of 1%) would reduce the shortfall by 18%.

Yes that means cuts of >20% to get the subsidy back to pre Covid-19 levels, however. However with a need to be greener there's going to be costs with getting us off or carbon habit and so maybe a subsidy of £1.5bn next year (possibly cost to £1bn if the fall is less than 20%) with it falling back to the ~£300 million mark by 2030 might be an acceptable cost (typical value for the subsidy for the day to day running of the network, i.e. excluding enhancements).

It might even be possible to get it down faster if there's more electrification (and with a clearer picture of the costs of running diesel trains Vs electric trains the benefits of electrification might be better understood within government, but I won't hold my breath).

Whether it's £1.5bn or not, is fairly unlikely to be close to the £3.5bn which the railways have burned through in the last 6 months.

What you seem to be getting at is that you think there's loads of extra yeild that can be extracted from people who used to have season tickets? I doubt very strongly that that's possible. White collar employers allowing such latitude on working at home means the residual commuter is suddenly a lot more price elastic. The best yeild came from business travellers, and there's squat evidence of those returning. Who is going to be happy to go back to the days of the £240 First Anytime Single on expenses? You're also assuming there will be a vaccine, no further major 'lockdown' restrictions, a growing economy, and no disruption from the end of the transition or the unemployment crisis or disruption from civil unrest? Pretty sunny view. We're six months into this pandemic and associated economic crisis, and absolutely no new electrification or new carbon levies have been announced. I don't think they're going to be relevant to recovery from this shock because the government aren't yet committed to them. They will take effect too late.

 

[F Great Eastern]

The Governments decision will be based on one very clear factor.
Does the new system allow us to nationalise the praise and privatise the blame like the current one does whilst giving the impression they are doing something to address the bad things?

The whole current system is gamed so the government can privatise the blame and nationalise the praise through micromanagement behind the scenes and failing to deliver promises, in the knowledge that the lesser informed public will blame the operator for something that may be outside of their control, rather than blaming them. Unfortunately the Department for Transport and the government is rather more focused on ensuring that people are blaming someone else rather than them, rather than just focusing on the quality of rail services

It sounds like the proposed system is about giving operators even less freedom than they have now and allowing the clueless bunch in the DfT to dictate even more absurd and illogical things in the knowledge that if all goes wrong, the operator will get the blame even though they even less say than they do now.

See also: Hiving schools off to be controlled by academy trusts rather than the state, so when a school fails due to underfunding, the government can wash it's hands of any blame and point to the trust, independent from the state, as being the problem rather than underfunding.

 

[BeHereNow]

The Governments decision will be based on one very clear factor.
Does the new system allow us to nationalise the praise and privatise the blame like the current one does whilst giving the impression they are doing something to address the bad things?

The whole current system is gamed so the government can privatise the blame and nationalise the praise through micromanagement behind the scenes and failing to deliver promises, in the knowledge that the lesser informed public will blame the operator for something that may be outside of their control, rather than blaming them. Unfortunately the Department for Transport and the government is rather more focused on ensuring that people are blaming someone else rather than them, rather than just focusing on the quality of rail services

It sounds like the proposed system is about giving operators even less freedom than they have now and allowing the clueless bunch in the DfT to dictate even more absurd and illogical things in the knowledge that if all goes wrong, the operator will get the blame even though they even less say than they do now.

See also: Hiving schools off to be controlled by academy trusts rather than the state, so when a school fails due to underfunding, the government can wash it's hands of any blame and point to the trust, independent from the state, as being the problem rather than underfunding.

I agree with your overall point. But the explanation implies that everything that ever goes wrong on the railway is the fault of the Department for Transport's specification. That seems to be a simplistic view of a complicated situation and I'm sure we could all think of examples where train operators are at fault (as well as others where the Department or Network Rail have made errors).

As an update both BBC and the FT reporting that some operators likely to be "nationalised".

Rail nationalisations may be coming down the track

Control of certain struggling franchises could be handed back to the government, sources say.

www.bbc.co.uk

"Some UK railway franchises could be nationalised when emergency deals set up during the coronavirus pandemic expire on Sunday."

"at the beginning of the year ministers were poised to announce an overhaul of Britain's railways.

Reliability on certain networks had been poor and some train companies were losing money.

The government took control of the operator Northern in January. South Western Railway was heading in a similar direction."

 

[Starmill]

Nothing on the DfT News page this morning

 

[Bald Rick]

Nothing on the DfT News page this morning

I’d be surprised if anything is announced before Sunday. Something could leak tomorrow I suppose.

 

[dk1]

Announcements expected by 07:00 Monday in time for the opening of the Stock Exchange.

 

[moorw003]

I'm working on Monday morning at 6am. Potentially, not knowing who my employer is!

 

[LNW-GW Joint]

Remarks by Steve Montgomery (First Group) don't suggest they are worried about the outcome.

Rail companies race to thrash out interim Covid-19 rescue deals

Talks between firms and UK government in deadlock despite deadline just 48 hours away

www.theguardian.com

Steve Montgomery, head of UK rail at First Group, said: “There’s a lot of speculation. Clearly we are in negotiations, and they are quite intense, and everyone is working exceptionally hard to get to resolutions. Everyone is trying to get to some agreement.”
Speaking at a Transport Times rail summit, he added: “The government has stepped up to the plate and backed this industry, and we all have to recognise that and learn to work in a different way – it’s really important we get this resolved in the next 48 hours.”

 

[pdeaves]

I'm working on Monday morning at 6am. Potentially, not knowing who my employer is!

I am sure your employer will be the same as it is today. If (if, big if) there will be any change then the agreement will be how to transition to another owner in (say) four weeks' time.

 

[Clarence Yard]

Your employer will be the same but who owns that TOC may not be.

There is no automatic extension to an EMA - it has to be a mutual decision to extend otherwise, unless there is an agreement for the OLR contractors to take over, it reverts to franchise conditions and the strong likelihood then is that the keys get thrown back straight away and OLR will have to be deployed.

 

[dk1]

I'm working on Monday morning at 6am. Potentially, not knowing who my employer is!

Doesn't really matter. Just another name & eventual logo/livery

 

[Bald Rick]

Remarks by Steve Montgomery (First Group) don't suggest they are worried about the outcome.

Rail companies race to thrash out interim Covid-19 rescue deals

Talks between firms and UK government in deadlock despite deadline just 48 hours away

www.theguardian.com

Well he couldn’t say “this is looking tricky” or “deal almost done” or anything that could indicate the outcome, as that would affect the share price before the deal is announced.