Rail 608: The franchising question remains unanswered

In 2009, it will be difficult to get away from issues that go to the heart of the way that the railways are run and, in particular, the franchising structure. Everyone knows it is going to be a tough year, but just how hard will determine whether the system survives or results in a total overhaul. Certainly, decisions by various operators in the run up to Christmas weakens their case for retaining the status quo  and has alerted the new ministerial team – the rather aloof Geoff Hoon and the very able Lord Adonis – to the fundamental problems of the franchising system.

 The completion of the West Coast Main Line (well, almost since some of the descoped work has been reinstated and will be carried out between now and June) and the implementation of its new timetable raised memories of the chequered history of that refurbishment, in particular the infamous ‘PUG2 (passenger upgrade 2)’ contract between Virgin and Railtrack. Originally, the line was supposed to be upgraded to 140 mph and Virgin signed a deal which guaranteed this by 2005. As a consequence, Virgin then was granted a franchise agreement which would have meant that by now it would be paying over £100m in premium payments to the government. Instead, because Railtrack – a private company which paid dividends to shareholders – was unable to deliver on the deal, the franchise had to be changed and as a consequence Virgin is currently been paid £300m during the current financial year.

 Now, it is undoubtedly good news that the work has been finished and that train frequencies and timings are greatly improved. There are three trains per hour between London and both Manchester and Birmingham, and with Manchester just a couple of hours away from the capital, who on earth would be mad enough to drive or fly (unless they are taking a connecting flight).

 However, there is a fundamental contradiction in the service that is being provided at public expense, While on the one hand the service is so frequent that you do not have to bother with a timetable or run for a train because, as my mother used to say of buses and girls, there will always be another one along soon. Yet, there are enormous penalties for taking advantage of this turn up and go service. The difference between booking in advance and turning up without a ticket is huge and has even been increased because Virgin has reduced fares on some advanced tickets with single fares to Birmingham and Manchester as cheap as £5 and £8 respectively. Therefore the heavy cost of increasing these frequencies to the public purse is not benefitting passengers as much as it should. There will be countless empty seats because of the ridiculous restrictions imposed by Virgin. I know they need to have a system of ‘yield management’ but the increase in frequencies makes the current rules unworkable.

 There has been, by the way, a minor victory over the joint campaign being run by Nigel Harris and I over the iniquity of charging people full extra fares for getting on the wrong train. We have argued for greater flexibility and for any moneys already disbursed to be taken into account. Virgin has now said – though the company is not giving much publicity to this because it is fearful of people exploiting its goodwill – that from January 5, people who have got an invalid ticket will no longer be charged the full standard fare but will be charged the off peak fare (which used to be the saver).

 This a welcome concession but hardly addresses the main point that people who happen to be on one off peak train rather than another, and therefore not taking up a seat which would otherwise be revenue earning, are charged massively simply because they were not able, for one reason or another, to get onto their booked train.

 Here’s an idea to solve this. Virgin could sell tickets to turn up and go passengers on the basis of what they would have paid if they had bought them at the last moment the night before, when advance sales close. Therefore if it was a train in high demand, then they might have to pay the full off peak fare, but if tickets had been available at £20 the night before, then that’s what they would pay.

 Or alternatively, advance tickets could be sold for a spread of trains, so that they are much more flexible and do not apply just to one train – travel between 10 and noon, say could be part of the advance ticket deal, since so many people do not know precisely when they will get bored talking to grandma or their connecting bus will arrive.

 It was disgraceful for a Virgin spokesman to claim that ‘airlines don’t offer cheap tickets to people turning up at the last moment, so why should we’. This comparison with airlines is completely erroneous. Trains are a public service, provided with vast amounts of subsidy and therefore train companies have an obligation to provide a service which is accessible as possible within the commercial constraints under which they operate.

 News from other franchises seems to show that there is no recognition of this at all from the train operators and that they are winding up for a series of mighty battles with the Department and ministers. There is considerable fury within the Department over the decision by South West Trains to cut back dramatically on ticket office opening hours, including at some very heavily patronised stations. Indeed, the Southern franchise document has been carefully worded by the Department to ensure that whoever wins it will not be able to embark on a similar series of cut.

 There is consternation, too, about the cutbacks by National Express on its East Anglia franchise. Not only has it announced the abandonment of its restaurant car service, widely reputed to be the best in the country and thought to break even, but staff cuts are biting deep into the organisation. The scrapping of the meals service has caused great consternation at the Department highlighted by an exchange between a local MP Norman Lamb (Libdem North Norfolk) and the rail minister, Lord Adonis who was clearly annoyed but said that the service was ‘a commercial decision’ outwith the franchise agreement. However, Mr Lamb pointed out that the franchise contract said that the operator ‘will continue to offer catering facilities from on-board kitchens’. Either the Department has cocked by allowing such weasel words to get into a contract which does not make clear what the obligations are, or else National Express has breached the contract.

 According to insiders, there is a widespread feeling among the staff on National Express East Anglia that the franchise is being milked for all National Express can get out of it, because of the hard times to come. Apparently, as recently as October, the company was saying that all was rosy and that there were huge profits still to be made, but now the tune seems to have changed completely. Contrary to media reports, apparently all staff – including drivers and revenue protection inspectors – are being encouraged to apply for redundancy but obviously the company will have to be careful not to let too many people go.

 Then we had Keith Ludeman from Go Ahead rather letting the cat out of the bag over what he thinks of the flexibility of franchises. In an interview published in The Guardian (December 17 2008) he boldly stated that the franchise would need to be renegotiated and services cut if the recession bites. He said ‘There is nothing to stop us, if demand falls off, going to the Department and asking to take services out,’ he said. Ludeman added that, as well as cutting services, franchise owners could reduce the number of carriages on trains and stressed that the franchise deal was not an ‘inflexible agreement’:  ‘we have the ability to negotiate with the department in the event that there is a downturn – in other words they are open to renegotiation if the operator is doing badly, but there is never any such talk when the operators are happily making super profits.

 All this rather gives the lie to the train operators’ case when they moan about the micromanagement of the Department and to the notion that the operators are taking revenue risk. Now, I do know that the best way to run a railway is not from Whitehall, but the franchises are a contractual arrangement which the Department has an obligation to run in the most efficient manner and to ensure the public gets value for money and a good service. Therefore, if the operators, in their panic to cope with the credit crunch, are all too ready to dump any part of their service which is not bolted down by contract, then micromanagement is what they will have to accept.

 In my view, it would be much better to have this type of close supervision from a body removed from the Department, so that it would be undertaken by career railway managers rather than civil servants who disappear after a couple of years in the job. Putting a railways agency in charge of the franchising is an obvious step. But, as I said above, it is no good the train operators complaining that they are hard done by when they are behaving with little regard for anything other than the short term which, in fairness, the daft nature of the franchising system, with its seven year terms, encourages.

 I hesitate to repeat myself, but one has to ask the Wolmar question again: ‘What is franchising for?’ It is clear, too, that this is something that the new ministers are asking too, and that the operators better be careful about overplaying their hand, or they may find themselves under the sort of management contract agreement which is operating very successfully for London Overground.

  • Isabel White

    Over Christmas I travelled with my partner by Eurostar and TGV to Nice. The Eurostar was late arriving in Paris which meant we missed our connection. Fearing the worst, as we had tickets that were priced on specifc trains, we expected to be charged a heavy penalty. As it turned out, SNCF were hugely apologetic and booked us on the next available train, upgraded to first class. Take note, South West Trains!

  • Allan Hedley

    I totally agree with Christians comments regarding Virgins or come to that the other long distance operators that sell Advance products, that if these products on trains had not sold out before the 1800 night before deadline, the operators should make these variety of tickets open to customers wishing to travel on trains during the the day.

    As regards to the current franchise system, as a dedicated railwayman i’ve never agreed with this form of franchising or with any previous systems. To be honest given the current economic climate the franchise / privatisation operation of this countrys railways should be scrapped and brought back into public ownership. Reading many of the rail industry magazines i’m sick of reading about the ORR has to do agree to this… or DFT has to sanction this… ATOC says this… Network Rail asks for this …. TOCS must do this …. It’s not the way to run a railway!!!

    Re-form the British Rail board and let’s get on with doing the job properly!

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