TSC Franchising Report

[LNW-GW Joint]

The Transport Select Committee report into rail franchising, which is all over the media this morning, is here: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmtrans/66/66.pdf

Summary: The premise behind franchising was that competition would increase efficiency, reduce the taxpayer subsidy, lower fares and improve services. While franchising has facilitated passenger growth and service improvements, it is clear that it has not yielded all the competitive benefits initially envisaged by the Government in the early 1990s. Many metrics of performance are plateauing and the passenger is not receiving value for money.

It should go some way to answering Christian Wolmar's perennial question "what are franchises for".
It does not contemplate ditching the entire system, but proposes major changes.

Main points:
- smaller but longer franchises (more bidders, lower risk, more owner investment - ie more Chiltern-like)
- transfer franchise monitoring and enforcement to ORR or other independent body
- more open access, with access charging regime from CP6 making them pay towards fixed costs
- the concept of a PSO grant for specific services (franchise or open access). This is a bit like trying to make the BBC share the TV licence fee.
- make franchise periods match Network Rail funding cycles to avoid mismatches in expectations and delivery
- end the fares ratchet which skews increases from taxpayer to passenger
- DfT overloaded by current franchise schedule, make some longer direct awards for low-risk franchises to clear the decks
- improve integrated transport planning (eg airports, example is Stansted)
- no repeat of TSGN (too big, not enough risk on TOC, poorly monitored)
- unhappy with West Coast Partnership rationale
- more transparency on the content of competing bids is needed (after award)

All told, a good review of recent practice.
Whether DfT takes any notice of it is another matter.
One topic I can't see discussed is devolution, which could alter the franchise map considerably.

 

[WatcherZero]

These are all things the government had already committed to do, unfortunately it doesn't always work out in practise with shorter franchises having to be squeezed in to mesh with infrastructure works for example.

 

[PHILIPE]

Chris Grayling interviewed on the Andrew Marr show this morning. As to be expected, said we've acheived this, acheived that, invested here and there, brought about improvements in this field and that field, Blah, blah, blah. Dodged the actual issue.

 

[The Planner]

Control Periods are too short, it is daft having to deal with 5 year chunks of money.

 

[yorksrob]

It'll be interesting to see whether Gmt will end the fares 'ratchet'. I can't see it happening personally.

 

[Moonshot]

Control Periods are too short, it is daft having to deal with 5 year chunks of money.

This is very true.....we tend to get hung up about control periods etc.

 

[mikeg]

So the report is essentially calling for more vertical coordination, but also more horizontal fragmentation. I have to say, living on the route of an open access operator I honestly don't think it solves much. For sure, we now have a direct link to London but it seems to be more a cream skimming exercise. It has often been said that OAOs result in higher profits and lower fares, but I have a feeling this comes at the expense of other routes on which the competition doesn't exist. The gap has to be filled somewhere - of course it could be that lower fares and higher service standards/capacity do this but this could just as easily be enforced far more universally through regulatory intervention than it could through OA and competition. More detailed study is needed though.

The southern franchise wasn't necessarily a bad idea, what was a bad idea was the enforcement of unpopular policy without consultation and also trying to create four sub-brands. It would have probably been better acting as one franchise in the true sense, but with some degree of management delegation, just call it 'Southern'.

In any case they're proposing a more Chiltern-like approach but that only works for self-contained services. In other cases the recommendations of more vertical cooperation would probably be offset by the greater horizontal fragmentation - it's all very well asking for more cooperation between TOCs and NR but when there are three or more TOCs with conflicting motives, how is this meant to work?

Just my thoughts.

 

[Gareth Marston]

If we keep tinkering one day well find the magic formula to make franchising work....yawn.

 

[Groningen]

Rail franchising system 'not fit for purpose', MPs warn

The UK's rail franchising model is "no longer fit for purpose" and is failing passengers, MPs have warned.The Transport Committee said there were "serious deficiencies" in the way the Department for Transport awarded contracts, leading to higher fares and poor performance. The MPs urged ministers to launch an independent review of the system. Transport Secretary Chris Grayling said the committee had made some "sensible recommendations". He said the main problem was that the rail network was "bursting at the seams". The MPs' report said the current model of awarding franchises to companies to run services in different parts of the country had enabled the rise in passenger numbers. But they said it had not increased competition in the way the government had hoped in the 1990s. "Many metrics of performance are plateauing and the passenger is not receiving value for money," the report said.

How the system works
There are 15 franchises in England and Wales which each give companies the right to run passenger services in a particular area for a specified period
They are awarded following a tendering process that involves the Department for Transport asking for expressions of interest before it consults with the public and ultimately selects an operator from a shortlist of companies bidding for the contract
The railway network was privatised under John Major's Conservative government in 1993
Labour has promised to renationalise the railways as each contract expires
The train operating companies are not responsible for track maintenance, which falls to publicly-owned Network Rail

The committee said while there could be no "single template" for franchises, there was "merit" in obtaining longer agreements covering smaller areas. The opportunity of smaller franchises with less financial risk could lead to new companies appearing on the market, the MPs said. Their report comes after the Association of British Commuters applied for a judicial review into the government's handling of the Southern rail crisis, which has seen months of delays and cancellations with packed services hit by a wave of industrial action. The group says ministers have acted unlawfully by failing to determine whether managers have breached franchise obligations. The Transport Committee also called on the government to set out how much the problems with the Southern, Thameslink and Great Northern franchise had cost taxpayers. "Given the exposure of the taxpayer to the failings of this franchise, it is unacceptable for the department to maintain its current 'arms-length' approach," the report said. "We recommend the department intervene to ensure that all possible steps are being taken to stop the haemorrhaging of income." It said the government should consider "restructuring" the franchise if operator Govia Thameslink was officially found to be in breach of its franchise. Transport Committee chairman Louise Ellman said: "While franchising enabled passenger growth and service improvements when it was first rolled out, passenger satisfaction with the railways is falling. "Its core objectives are no longer being met, potential benefits are being lost and the passenger is suffering through higher fares and continued underperformance." In January the cost of a rail ticket rose on average by 2.3%, prompting protests at railway stations across the UK. Ms Ellman told BBC Breakfast the DfT was too soft on train companies that broke promises on performance. "And if the department can't do that, perhaps somebody else should be looking at it to enforce the promises that the train companies make when they take over running the service," she said.

The MPs suggested that a complete restructuring of the system would be "prohibitively impractical", but it recommended that as contracts expired the DfT might consider whether they be modified to "align better with the specific market they serve". Labour, which wants to bring the railways back under public ownership, said the network was "fragmented and inefficient". Shadow transport secretary Andy McDonald said: "A railway works best as an integrated network but privatisation and franchising have meant breaking it up." Speaking on BBC's The Andrew Marr Show, Mr Grayling said the government was already taking steps to ensure Network Rail worked more closely with rail operators, as recommended by the committee. The DfT said £40bn was being invested to upgrade the railways and that the franchising system had helped to create one of the safest and fastest growing networks in Europe. A spokesman said: "We can make improvements and the transport secretary has been clear that it will take new ways of working, more investment and better collaboration across the industry to tackle the challenges ahead."

Source: BBC News

 

[Moonshot]

If we keep tinkering one day well find the magic formula to make franchising work....yawn.

In one respect it has.....passenger numbers are now at their highest on record.

 

[PHILIPE]

In one respect it has.....passenger numbers are now at their highest on record.

Problem is that seats on trains haven't risen to cater for them in many cases.

 

[Railsigns]

In one respect it has.....passenger numbers are now at their highest on record.

Correlation doesn't prove causation.

Passenger numbers have also risen on the publicly owned Northern Ireland Railways, proving that private sector involvement isn't a prerequisite to rising passenger numbers.

 

[Morgsie]

This is about the third debate I am aware of regarding Franchising policy: the first one was in the wake of the 2012 ICWC fiasco where there were Reviews but the system was adapted slightly no major changes. The second one was East Coast being re-let and the debate there was whether DOR could bid for Franchises. Here we go again another debate on Franchising. I have not read the Report yet though my understanding is full-scale reform including renationalisation is out of the question so tweaking the current system.

Co-ordination with NR worries me as a few years ago if I recall there was an Alliance between NR and SWT which ended badly. Though I have not read the Report yet some of the points raised in the OP are interesting in theory but will it work in practice.

 

[LNW-GW Joint]

This is about the third debate I am aware of regarding Franchising policy: the first one was in the wake of the 2012 ICWC fiasco where there were Reviews but the system was adapted slightly no major changes. The second one was East Coast being re-let and the debate there was whether DOR could bid for Franchises. Here we go again another debate on Franchising. I have not read the Report yet though my understanding is full-scale reform including renationalisation is out of the question so tweaking the current system.

Co-ordination with NR worries me as a few years ago if I recall there was an Alliance between NR and SWT which ended badly. Though I have not read the Report yet some of the points raised in the OP are interesting in theory but will it work in practice.

DOR doesn't exist, and there are few-to-none public sector groups who could (and be allowed to by their "owners") bid for rail franchises.
The NR/SWT alliance did not end "badly", Stagecoach decided it was not in its commercial interests (and the franchise is being relet anyway).
Other alliances are "working" eg Scotrail, but that is a bit special.
It won't work where there are multiple TOCs on an NR route (eg WCML).
SWT was relatively easy, as they are the only operator in much of their area.

 

[PHILIPE]

Under the current system, the TOCs have to take the flak and, in the eyes of many passengers, are seen to be responsible for many things which are outside their control.

 

[Moonshot]

Correlation doesn't prove causation.

Passenger numbers have also risen on the publicly owned Northern Ireland Railways, proving that private sector involvement isn't a prerequisite to rising passenger numbers.

true ....but of course the taxpayer still provides the bulk of the capex investment same as here.

 

[Moonshot]

Under the current system, the TOCs have to take the flak and, in the eyes of many passengers, are seen to be responsible for many things which are outside their control.

In that respect, having the TOCs control items which the currently dont ( such as infrastructure) may well be the way forward?

 

[Gareth Marston]

In one respect it has.....passenger numbers are now at their highest on record.

Tired old smokescreen.

 

[pdeaves]

- more open access, with access charging regime from CP6 making them pay towards fixed costs

Will they magic up some capacity for open access operators, or will it effectively lead to open access running certain 'existing' services with the franchise lumbered with the rest (with commensurate loss of efficiencies)?

- end the fares ratchet which skews increases from taxpayer to passenger

I'm sure the treasury will put paid to that!

- improve integrated transport planning (eg airports, example is Stansted)

I'd say that is good in theory, but who should pay? Should the railways always pay? Should bus, airport, etc. companies be expected to contribute where they benefit too? Indeed, could such companies actually lead schemes?

The whole lot looks like good theory where infinite companies can supply an infinite product, but looks not so good where both are severely restricted (and rely on each other).

 

[Moonshot]

Tired old smokescreen.

I cant argue with the facts .....

We may as well accept that franchising in one form or another is here to stay.

One point raised by the TSC is that performance matrices are flatlining. As traincrew myself, its easy to see why this is.....more trains and more services putting pressure on the pinchpoints.

 

[coppercapped]

true ....but of course the taxpayer still provides the bulk of the capex investment same as here.

True, but using the Northern Ireland Railways as a comparison, as the previous poster has done, with changing passenger numbers on Great Britain is not valid. For a start the railway system in Northern Ireland is very small, a couple of hundred route miles, compared to that on Great Britain. Distances are short. What is more pertinent is that NI is still recovering from the effects of the civil unrest resulting which resulted in a depressed economy so rail traffic is starting from a low base.

If one compares growth in passenger traffic in some other countries over the same period - it has also increased in France, Germany, Belgium and Holland. Even if one allows that traffic growth started from a higher base than that pertaining here during BR's last few years (when traffic was falling) - it has nothing like doubled as it has here.

It is looks like a duck, walks like a duck and quacks like a duck - it probably is a duck.

 

[Moonshot]

True, but using the Northern Ireland Railways as a comparison, as the previous poster has done, with changing passenger numbers on Great Britain is not valid. For a start the railway system in Northern Ireland is very small, a couple of hundred route miles, compared to that on Great Britain. Distances are short. What is more pertinent is that NI is still recovering from the effects of the civil unrest resulting which resulted in a depressed economy so rail traffic is starting from a low base.

If one compares growth in passenger traffic in some other countries over the same period - it has also increased in France, Germany, Belgium and Holland. Even if one allows that traffic growth started from a higher base than that pertaining here during BR's last few years (when traffic was falling) - it has nothing like doubled as it has here.

It is looks like a duck, walks like a duck and quacks like a duck - it probably is a duck.

Agreed.....and I note that the EU is looking more and more to open up rail services to franchising type bids to running rail services in Europe.

 

[Railsigns]

True, but using the Northern Ireland Railways as a comparison, as the previous poster has done, with changing passenger numbers on Great Britain is not valid.

It's perfectly valid. It is undeniable proof that railways can attract passenger growth without being in the private sector.

 

[Moonshot]

It's perfectly valid. It is undeniable proof that railways can attract passenger growth without being in the private sector.

To be fair, the growth has come on the back of a lot of investment provided by the taxpayer. If that same investment had been provided by the private sector, I rather think that numbers would be similar.....so really the only question to be answered is ...is the investment value for money ? Which I guess is open to a number of differing interpretations.

 

[yorksrob]

True, but using the Northern Ireland Railways as a comparison, as the previous poster has done, with changing passenger numbers on Great Britain is not valid. For a start the railway system in Northern Ireland is very small, a couple of hundred route miles, compared to that on Great Britain. Distances are short. What is more pertinent is that NI is still recovering from the effects of the civil unrest resulting which resulted in a depressed economy so rail traffic is starting from a low base.

If one compares growth in passenger traffic in some other countries over the same period - it has also increased in France, Germany, Belgium and Holland. Even if one allows that traffic growth started from a higher base than that pertaining here during BR's last few years (when traffic was falling) - it has nothing like doubled as it has here.

It is looks like a duck, walks like a duck and quacks like a duck - it probably is a duck.

NI was recovering from the effects of civil unrest.
The North of England was recovering from the effects of de-industrialisation.
The South East of England was undergoing considerable change in terms of where people lived and where they worked as a result of increasing congestion and house prices.

There have been many unusual circumstances in the past two decades across Britain which probably affected passenger numbers.

If it looks like a duck and quacks like a duck, it could be a duck. But then again, it could be a drake.

 

[Gareth Marston]

what many people don't realise is that the we've had the highest ever officially recorded growth in population between the 2001 and 2011 census's. A fair chunk of the growth we've seen can be chalked off against growing population and 15 years of continuous economic growth between 1992 and 2007.

 

[Mark62]

This government will always be soft on the companies that own the franchises because these companies bankroll the Tories.
If you dig deep into the finances of this government you will see who really runs this country.
It's not altruism that makes big business contribute to the Tory party. They do it in return for favours.
When the tenders are issued for HS2, I guarantee that the biggest recipients of taxpayers money will be financial contributors to the Tory party.
Take a look at how much money the Tories had to spend in their election campaign and how much labour had. Thatcher ensured that labours union contributions would be strangled. But who will do the same to the big Business contributions that keep the Tory party in government?
Of coarse nothing is going to change after this transport committee report. I suppose that is the birtish form of democracy. Privelige will always usurp necessity and the greater good.

 

[LNW-GW Joint]

This government will always be soft on the companies that own the franchises because these companies bankroll the Tories.

Last time I looked Brian Souter funded the SNP.
None of the foreign groups fund UK political parties.
That doesn't leave very many Tory bankrollers.

 

[Chrisgr31]

One point raised by the TSC is that performance matrices are flatlining. As traincrew myself, its easy to see why this is.....more trains and more services putting pressure on the pinchpoints.

I think this is one of the biggest issues with GTR. They are trying to run the service by maximising the trains on track, minimising the number of crew needed to crew those trains, and minimising the number of units they have in reserve.

The outcome is that the moment anything goes wrong it impacts on many other services. It appears to be luck as to whether the service actually recovers or disappears down the plughole.

This is where franchising seems to fail it encourages the minimum of resources.

 

[PR1Berske]

It's perfectly valid. It is undeniable proof that railways can attract passenger growth without being in the private sector.

In a smaller area covering fewer stations in very different circumstances.

It would be an investment disaster to try the same in mainland GB.