Removing open access operators from the network by 2029

[Richardr]

Open Access is an EU hobby horse, and our whole post brexit trading arrangements are based around the principle that if we don't diverge too far from EU regulations they will not impose trade barriers on us, and with Keir trying to align even closer with them, we aren't going to do anything to annoy them

The EU will have zero view on what a third party country does in this area. It doesn't and won't affect the trade barriers we have erected.

Meanwhile, the Sunday Times has the following article today [heading and first couple of paragraphs as full article behind a paywall]:

Private rail firms face probe over ‘super’ profits​

Sir Richard Branson’s hopes of a return to Britain’s railways are in peril as a review is ordered into ‘open-access operators’ snaffling fares bound for the Exchequer

A major row has erupted after ministers ordered a review into privately owned train companies extracting “super normal profits” that risk costing taxpayers more than £200 million a year.

An “extremely late” intervention by transport secretary Heidi Alexander to clamp down on “open access” train operators has this weekend sparked recriminations from FirstGroup, one of the country’s biggest transport companies.

Private rail firms face probe over ‘super’ profits

Sir Richard Branson’s hopes of a return to Britain’s railways are in peril as a review is ordered into ‘open-access operators’ snaffling fares bound for the Exchequer

www.thetimes.com

 

[Magdalia]

I'd love to see a Venn Diagram of people who support nationalisation and people who support Open Access.

If you mean, is there an intersection of the two sets, then the answer is yes.

As someone who uses the southern end of the ECML, and used to be a commuter, I have a love/hate relationship with open access. The open access operators have linked more cities directly with London, on routes that don't have enough business to support a frequent service. They have been good for places like Hull, Sunderland and Bradford. Politically, it would be difficult to take them away.

But the open access operators take up paths through the 2 track section at Welwyn and platform capacity at Kings Cross. When they started, that didn't matter much, because there was spare capacity. But now there is no spare capacity, the circumstances have changed.

Wearing my economist's hat, the problem is that, if the open access operators can make money running 5 car trains through the 2 track section at Welwyn, then they are not being charged enough for access. Now they should need to run 10 car trains in order to make money. For Grand Central, that might mean splitting/joining Sunderland and Bradford portions at Doncaster, for Hull Trains that might mean doing the same with a Scunthorpe and Grimsby portion.

The difficulty with this is that an operator like Lumo can bid higher than an operator linking places like Hull, Sunderland and Bradford with London. Lumo reminds me of the Highwayman, and in more ways than one.

I don't have a problem with open access operators sharing 1tph off peak in and out of Kings Cross, providing that they serve cities that wouldn't otherwise have through trains, and that they use the capacity properly by running 10 car trains. But I wouldn't allow open access operators to duplicate through services already offered by Great British Railways.

Furthermore I would extend this approach, by giving Great British Railways the opportunity to withdraw from other routes that don't justify a high frequency service. Here I'm thinking of long distance cross country routes using short trains to provide a high frequency service even though the people travelling end to end are a tiny proportion of overall usage. The example I would use here is another location where there is no spare capacity, and that's Ely. The main reason why there is no spare capacity at Ely is that, by historical accident, lots of paths are taken up by short trains running long distances, Norwich-Liverpool and Stansted-Birmingham. I would let Great British Railways out of providing services like these, so that it could concentrate on the big shorter distance flows through Ely, which are Cambridge/Stansted to/from Peterborough and Norwich. If there really is demand for long distance connectivity cross country, then it should be for open access operators to provide it, just like between London and Hull, Sunderland and Bradford.

 

[Brubulus]

If you mean, is there an intersection of the two sets, then the answer is yes.

As someone who uses the southern end of the ECML, and used to be a commuter, I have a love/hate relationship with open access. The open access operators have linked more cities directly with London, on routes that don't have enough business to support a frequent service. They have been good for places like Hull, Sunderland and Bradford. Politically, it would be difficult to take them away.

But the open access operators take up paths through the 2 track section at Welwyn and platform capacity at Kings Cross. When they started, that didn't matter much, because there was spare capacity. But now there is no spare capacity, the circumstances have changed.

Wearing my economist's hat, the problem is that, if the open access operators can make money running 5 car trains through the 2 track section at Welwyn, then they are not being charged enough for access. Now they should need to run 10 car trains in order to make money. For Grand Central, that might mean splitting/joining Sunderland and Bradford portions at Doncaster, for Hull Trains that might mean doing the same with a Scunthorpe and Grimsby portion.

The difficulty with this is that an operator like Lumo can bid higher than an operator linking places like Hull, Sunderland and Bradford with London. Lumo reminds me of the Highwayman, and in more ways than one.

I don't have a problem with open access operators sharing 1tph off peak in and out of Kings Cross, providing that they serve cities that wouldn't otherwise have through trains, and that they use the capacity properly by running 10 car trains. But I wouldn't allow open access operators to duplicate through services already offered by Great British Railways.

Furthermore I would extend this approach, by giving Great British Railways the opportunity to withdraw from other routes that don't justify a high frequency service. Here I'm thinking of long distance cross country routes using short trains to provide a high frequency service even though the people travelling end to end are a tiny proportion of overall usage. The example I would use here is another location where there is no spare capacity, and that's Ely. The main reason why there is no spare capacity at Ely is that, by historical accident, lots of paths are taken up by short trains running long distances, Norwich-Liverpool and Stansted-Birmingham. I would let Great British Railways out of providing services like these, so that it could concentrate on the big shorter distance flows through Ely, which are Cambridge/Stansted to/from Peterborough and Norwich. If there really is demand for long distance connectivity cross country, then it should be for open access operators to provide it, just like between London and Hull, Sunderland and Bradford.

Track access should cost a similar amount to DfT revenue from GBR operating a new (generative) service on any given route. For example, if it is modelled that an LNER service to Hull would return X amount to the DfT, this is what the track access for HT is set as. This way OA is enabled to improve the railway and have track access at a price the market can bear, and the DfT is confident that it is not losing out relative to said services being operated by them.

If OA can't bear that cost, it is reasonable for the DfT to operate that service instead. To this effect, there should be a provisional in the GBR bill obliging DfT operation of OA paths not renewed due to the increase in track access costs for 10 years.

I like the EU approach of a free market on long-distance routes, and the DfT does seem determined to use them as a cash cow.

However Lumo should face particularly high charges given it's duplication of DfT services, using the same formula as other operators where the loss to the DfT is represented in track access cost.

 

[renegademaster]

The EU will have zero view on what a third party country

Grand Central is owned by Arriva a.k.a DB. Other European operators occasionally show interest in running open access operators. They have enough fingers in our pie to have an opinion on what environment we create for potential open access operators

== Doublepost prevention - post automatically merged: Sunday at 13:20 ==

DfT to operate that service instead.

But they won't, because it would be them taking the revenue risk not the OA operator.


Amazon allow small businesses to use their market place and warehouses for a fee that doesn't take all the profit from the seller, since they don't view them as unwanted competitors but revenue generators for products they aren't willing to take a risk on themselves.

 

[HSTEd]

Amazon allow small businesses to use their market place and warehouses for a fee that doesn't take all the profit from the seller, since they don't view them as unwanted competitors but revenue generators for products they aren't willing to take a risk on themselves.

But if the access charges were set high enough to actually reach cost recovery, the open access operators would not exist.

This entire system is only viable because of a big pile of public money.

 

[Clarence Yard]

Track Access charges are artificially low due to the nature of the current regime, which is designed to encourage model shift towards rail. All operators pay relatively low marginal costs with the DfT picking up the tab through either Network Grant or the laundered “Fixed Track Access” charge (effectively another form of Network Grant).

It doesn’t have to be this way. Under current legislation, charges can rise to include long run incremental costs but what stops NR doing this is “the market can bear” test. Once legislation is passed to set this aside (which is expected), the track access charges can be raised substantially.

GBR can still give “discounts” for certain market sectors, such as Freight and Heritage/Charters but given they will be in competition with Open Access, other non-rail legislation will probably prevent them doing so for OA.

Which is one reason why the DfT is getting very excited. They don’t want to see any OA expansion and have their eyes fixed on substantially reducing OA in 2029 and forcing them to fold their operations into GBR. The charging regime is how they will do it and there is nothing that the OA operators can do it because it will be perfectly legal.

Which is also why the OA operators are also making a fuss now. They fear the politicians will be “bounced” by their officials late in the day to accept the DfT view and are looking to get firmer promises about their future, especially through the legislation.

 

[Zomboid]

Grand Central is owned by Arriva a.k.a DB. Other European operators occasionally show interest in running open access operators. They have enough fingers in our pie to have an opinion on what environment we create for potential open access operators

I don't think that whether or not the UK permits open access passenger trains will be any kind of factor in future dealings with the EU. It's such a minor thing in the grand scheme of our wider relationship, and ultimately doesn't affect anything beyond our own borders.

Might become a factor should we ever decide we want to rejoin, but that's not on anyone's agenda at the moment and isn't likely to be any time soon.

 

[357]

Grand Central run 10 car sets, albeit not very frequently.

GC are replacing the couplers on their entire fleet - I suspect they aren't doing this so they can continue running 5 car sets.

 

[renegademaster]

But if the access charges were set high enough to actually reach cost recovery, the open access operators would not exist.

This entire system is only viable because of a big pile of public money.

In terms how it looks to the exchequer, yes open access operators are partially subsidised, but less so if they where to run the service directly. The track access side is subsided but not the other costs.

 

[Zomboid]

In terms how it looks to the exchequer, yes open access operators are partially subsidised, but less so if they where to run the service directly. The track access side is subsided but not the other costs.

Though if the OAO is successful, the other aspects don't require subsidy

 

[Clarence Yard]

The exchequer sees the economic and social benefits of Open Access but it doesn’t come via the DfT’s budget line.

That’s always been the problem and why the Treasury has a much more balanced view of OA than the DfT.

 

[Brubulus]

The exchequer sees the economic and social benefits of Open Access but it doesn’t come via the DfT’s budget line.

That’s always been the problem and why the Treasury has a much more balanced view of OA than the DfT.

This is why I'm not sure if there is actually a crusade against OA, instead just that the DfT is briefing against it because they are annoyed about not getting as much money as they would have liked.

 

[renegademaster]

Though if the OAO is successful

If the OAO never existed, we wouldn't know. Think of the "stolen revenue" as a reward for taking a risk the government didn't.

 

[Brubulus]

If the OAO never existed, we wouldn't know. Think of the "stolen revenue" as a reward for taking a risk the government didn't.

Would agree here - If DfT is so convinced that OA paths are cashpoints, why didn't they use them in the first place. Therefore track access charges based on expected net revenue for DfT is a good way to charge for OA paths, since DfT experiences limited financial disadvantage.

 

[Djgr]

If you want a network then this requires cooperation and coordination rather than competition.

 

[HSTEd]

If the OAO never existed, we wouldn't know. Think of the "stolen revenue" as a reward for taking a risk the government didn't.

That means they can take a risk once and then cash out for the rest of time.

That is hardly a good deal for the taxpayer.

In terms how it looks to the exchequer, yes open access operators are partially subsidised, but less so if they where to run the service directly. The track access side is subsided but not the other costs.

No, they are most likely more subsidised than if they ran the service directly, but if they ran it they would get the profit the OAO makes.

If the OAO is making money, which it must for it to continue long term, then the taxpayer would be better off disposing of the Open Access Operator.

 

[Clarence Yard]

The OA operators can’t make super profits for all time, the ORR sees to that. Every periodic review they look into the sector and see if they can pay markups to the variable charges. At the last periodic review OA airport links (such as Hex) got included in the ICC.

The ORR also fix the rate of charge so, for example if PR28 was going to take place (it isn’t because GBR will take over by then), they would be looking at, say, the rate for Lumo (it is going to be around £5 a train mile from October) and whether to include Hull.

That is what the “market can bear” test is all about.

The ORR guide will be the profits made by the company concerned as compared to the business plan submitted to get their rights. They are only allowed to get a certain return on their business so it is quite an easy comparison to make.

What the DfT have forgotten is that the OA businesses were heavily loss making during the COVID period and although business has rebounded strongly, they have needed that recovery to get them back to where their submitted business plans said they would be.

 

[Dr Hoo]

It would have been good (and would still be good) to see the ‘Government’ being willing to take some risks by trying to develop long distance service offerings for ‘neglected’ parts of the Realm in the way that OA has. Whether this means through services to London from Cumbernauld, East Lancashire or South Humberside or possibly cross-country links such as Liverpool to Bristol and beyond isn’t really the point. Schemes such as Thameslink or Core TransPennine are fine but essentially ‘regional’.

Will there still be the ‘vision’ (as in ‘Great-British’…)?

 

[BlueLeanie]

So there are, I stand corrected. 3 a day. Enough to not quite fill one 9 car Azuma each way.

easyJet is around ten a day from EDI to London. That would be up to 1860 passengers, or almost five Lumo services. Or the standard accommodation of almost 4 Nine-coach LNER services.

It's time we had non-stop services from Edinburgh to London!

 

[NCT]

Track Access charges are artificially low due to the nature of the current regime, which is designed to encourage model shift towards rail. All operators pay relatively low marginal costs with the DfT picking up the tab through either Network Grant or the laundered “Fixed Track Access” charge (effectively another form of Network Grant).

It doesn’t have to be this way. Under current legislation, charges can rise to include long run incremental costs but what stops NR doing this is “the market can bear” test. Once legislation is passed to set this aside (which is expected), the track access charges can be raised substantially.

GBR can still give “discounts” for certain market sectors, such as Freight and Heritage/Charters but given they will be in competition with Open Access, other non-rail legislation will probably prevent them doing so for OA.

Which is one reason why the DfT is getting very excited. They don’t want to see any OA expansion and have their eyes fixed on substantially reducing OA in 2029 and forcing them to fold their operations into GBR. The charging regime is how they will do it and there is nothing that the OA operators can do it because it will be perfectly legal.

Which is also why the OA operators are also making a fuss now. They fear the politicians will be “bounced” by their officials late in the day to accept the DfT view and are looking to get firmer promises about their future, especially through the legislation.

Is VTAC artificially low to the point that it doesn't even cover actual variable costs?

I think it quite reasonable that the state pay for the infrastructure (fixed elements thereof) and the passenger pays for the trains. The state pays for the roads and passengers pay for the buses and trains / their own cars.

While train operations generating some surplus to pay for the capital costs of infrastructure upkeep is welcome, a substantial surplus should not be part of the government's 'business model'. Parity in infrastructure funding model between roads and rail is important - anything else is distortion. In the business vs public service debate, I think it's quite reasonable that trains are considered an economic good, but the provision and upkeep of infrastructure should be public service.

Put it another way, had DfT specified 1tp2h to Hull before Hull Trains existed, would it have cost more for DfT to run those services (through the franchising system of course) than it cost Hull Trains? Does the existence of Hull Trains and Grand Central mean the Network Grant and LNER's FTAC had to be revised up?

 

[Clarence Yard]

VTAC only covers the short run marginal costs of a train service on the network.

The rest of NR costs the industry knows as fixed costs but really consists of long run incremental costs (LRIC) and fixed costs that do not vary with traffic. It is LRIC that can be charged now, subject to the “market can bear” tests and it is LRIC that the DfT want to be charged to OA, irrespective of affordability.

The answer to the Hull Trains/GC vs Franchise question on Network Grant/LNER FTAC is probably yes. HT generated huge amounts in its early years, but on non ECML origin flows, although it’s appearance at Retford with regular services saw a huge spike in all operators revenue.

 

[Zomboid]

easyJet is around ten a day from EDI to London. That would be up to 1860 passengers, or almost five Lumo services. Or the standard accommodation of almost 4 Nine-coach LNER services.

It's time we had non-stop services from Edinburgh to London!

Or you could look at it as in an entire day they run less than 2 hours worth of LNER capacity

 

[NCT]

The answer to the Hull Trains/GC vs Franchise question on Network Grant/LNER FTAC is probably yes. HT generated huge amounts in its early years, but on non ECML origin flows, although it’s appearance at Retford with regular services saw a huge spike in all operators revenue.

I think the answer would need to be a bit firmer than 'probably yes' for DfT. I'm not asking for 'show your workings' as I'm sure it'd be far too complicated to show on a forum, but could Network Grant and FTAC calculations be traced back to an increase in Open Access mileages?

I'm not talking about LNER's eroded premium - I don't think it's right for the government to maximise that number at all costs.

As for LRIC, I'm not sure I entirely agree that it should definitely fall on the consumer. If the M1 needs a more intensive capital renewal cycle than the M56 it's the taxpayers paying for both.

There is a case for charging what 'the market can bear' and that's if capacity is genuinely being exhausted. In that case DfT can simply instruct LNER to apply for more paths than exists on the ECML, then Network Rail would have to declare the infrastructure as Congested which would then hit everybody.

To be honest, in principle I don't disagree with reducing FTAC and putting more (or even everything) into VTAC. As long as it doesn't hinder the industry from pursuing genuine 'marginal revenue > marginal cost' initiatives.

 

[BlueLeanie]

Or you could look at it as in an entire day they run less than 2 hours worth of LNER capacity

You're not comparing like with like.

LNER doesn't run any non-stop services. Without looking at BA, between easyJet and Ryanair there is a need to start running at least four non-stop services per day to accommodate less than half of the air traffic between the capitals.

There is an obsession with ending OA services like the Jacobite on Britain's Railways as part of a quest for the alleged "Stolen Income".

The focus should be on delivering new non-stop LNER services that compete with the airlines by improving capacity like the untouchable viaducts and tunnels.

If the Lumo, Hull, or Grand Central five car unit is taking up a path, then attach a 5 coach all-standard LNER unit to the back of it.

 

[Zomboid]

You're not comparing like with like.

LNER doesn't run any non-stop services. Without looking at BA, between easyJet and Ryanair there is a need to start running at least four non-stop services per day to accommodate less than half of the air traffic between the capitals.

There is an obsession with ending OA services like the Jacobite on Britain's Railways as part of a quest for the alleged "Stolen Income".

The focus should be on delivering new non-stop LNER services that compete with the airlines by improving capacity like the untouchable viaducts and tunnels.

If the Lumo, Hull, or Grand Central five car unit is taking up a path, then attach a 5 coach all-standard LNER unit to the back of it.

Yes, those LNER seats also take people between a whole array of different places, and that's actually one of the big benefits that rail can offer.

I'm not against running some non-stop London to Edinburgh (could just as readily be via the WCML or HS2 in due course) if there's a market for that and if they fit into the timetable.

 

[JamesT]

Grand Central is owned by Arriva a.k.a DB. Other European operators occasionally show interest in running open access operators. They have enough fingers in our pie to have an opinion on what environment we create for potential open access operators

DB sold Arriva last year.

 

[The Planner]

You're not comparing like with like.

LNER doesn't run any non-stop services. Without looking at BA, between easyJet and Ryanair there is a need to start running at least four non-stop services per day to accommodate less than half of the air traffic between the capitals.

There is an obsession with ending OA services like the Jacobite on Britain's Railways as part of a quest for the alleged "Stolen Income".

The focus should be on delivering new non-stop LNER services that compete with the airlines by improving capacity like the untouchable viaducts and tunnels.

If the Lumo, Hull, or Grand Central five car unit is taking up a path, then attach a 5 coach all-standard LNER unit to the back of it.

Why do they need to be non stop? A non stop path isn't always the best use of capacity either.

 

[NCT]

You're not comparing like with like.

LNER doesn't run any non-stop services. Without looking at BA, between easyJet and Ryanair there is a need to start running at least four non-stop services per day to accommodate less than half of the air traffic between the capitals.

There is an obsession with ending OA services like the Jacobite on Britain's Railways as part of a quest for the alleged "Stolen Income".

The focus should be on delivering new non-stop LNER services that compete with the airlines by improving capacity like the untouchable viaducts and tunnels.

If the Lumo, Hull, or Grand Central five car unit is taking up a path, then attach a 5 coach all-standard LNER unit to the back of it.

The Dec 2025 timetable will have 1tph King's Cross - York - Newcastle - Edinburgh services taking notionally 4 hours 4 minutes - I say notionally because there are pathing times all over the place (I'll save the debate of whether it's a difficult timetable or a bad timetable for later).

The ECML is too capacity constrained to offer anything better - even faster services or a higher frequency of fastest services will significantly reduce the rail offering of intermediate locations. Ultimately the railway is a public service and the competing needs of different markets need to be balanced.

The only way of producing a significant market shift from air to rail is HS2. The beauty of HS2 is that Old Oak Common will be convenient enough to even reduce the need for transfer flights.

 

[BlueLeanie]

Why do they need to be non stop? A non stop path isn't always the best use of capacity either.

The planes are non-stop.

Why shouldn't the trains be? There are plenty of other services available for people who want to take a stopper. So much more reassuring for people with luggage too.

Capacity is an an engineering problem, not a customer problem.

 

[Zomboid]

Capacity is an an engineering problem, not a customer problem.

Does it matter whose problem it is? If the trains don't fit then you have to decide what to cut in order to fit in the non-stops which probably won't be that much faster than the limited stop services once they actually get onto the rails.

If they did fit, then sure, give it a go.