Rail 758: Surprise: Labour gets it wrong on franchises

Martin Griffiths and his colleagues at Stagecoach need have no fear. As I mentioned a few weeks ago (Rail 754) Mr Griffiths did not much like Labour’s plan to allow a public sector bidder (pubsect) in franchise competitions. He threatened, indeed, to throw his toys out of the pram and not bid for franchises.

Well, Mr Griffiths can relax. After spending a couple of days at the Labour party conference in Manchester, he can rest assured that Labour’s plans are far from radical. They are not going to upset any applecarts. I have followed Mary Creagh, Labour’s transport spokeswoman, round the fringes, answering questions and making pretty much the same speech. She is personable, sassy and bright and is a genuine commuter cyclist who likes saying how she used to ride her bike to school when growing up in Coventry in the 1980s.

However, she is playing it very safe on transport. I asked, for example, whether she would transfer funds from the overblown roads budget created by George Osborne to rail given that she admitted there was a bit black hole in the electrification budget. No, she said, we need roads investment as well as rail and there were lots of potholes to fill in. ‘Yes,’ I retorted, ‘I meant capital spending’. She demurred and refused to make any such commitment.

Asked whether she had any intention of renationalising the railways, her answer was as firm as De Gaulle telling us we could not join the Common Market – ‘Non’. She did then say, though, that ‘it was more complicated than that’ and that there would be a pubsect bidder for the franchises. ‘We will be looking at reviewing the franchises’, she added.

However, she did not properly answer a question about which franchises would be ‘reviewed’ or on whether every franchise would have a pubsect bidder. Nor would she be drawn on why Labour has gone for the policy of allowing a pubsect bidder rather than simply allowing the franchises to lapse, which is certainly what most of the audiences at these meetings wanted.

This policy has, indeed, infuriated the Labour grassroots. You read it here first but I can see that the policy is one of those glaring political errors that any sensible person can see coming and yet the politicians grab on to like a drowning man clutching the last bit of flotsam. The poll tax, which resulted in the demise of Lady Thatcher, was probably the biggest of these blunders but in the transport sphere – leaving aside the daft structure of rail privatisation created by the Railways Act 1993 – the best comparable example is the Public Private Partnership on the London Underground. Boy, did a group of us which included Tony Travers of the LSE, Stephen Glaister then of Imperial College and a few others try hard to persuade Gordon Brown and other senior Labour figures that it was a bad and costly idea. We were ignored, hundreds of millions of pounds were wasted in creating an unworkable structure and further hundreds of millions were wasted in winding it up after a mere eight years and restoring the old status quo.

At least the pubsect bidder will not be as expensive, but it will be wasteful. First, there will have to be new legislation to allow public companies to take over franchises. This is specifically excluded at present by section 25 of the Railways Act which specifically says that public bodies cannot be franchisees and even lists them. Therefore, the change would need primary legislation.

Then there will all the cost of setting up the arrangement. There is a fundamental dishonesty at its root. The policy is a result of a compromise thrashed out by the National Policy Forum at a meeting in Milton Keynes this summer when the unions were pushing very hard for the franchises to revert to the public sector when they ran out. Ed Balls, the shadow chancellor, however would have none of it, arguing that it was ‘anti-business’ and the only policy on offer was the pubsect bidder compromise.

Now even some of the union leaders anxious to get behind Labour as it is close to an election, argue that the pubsect bidder policy is the only one that is feasible. This is quite wrong. The irony is that allowing the franchises to go back into the pubsect – and not be refranchised – would be perfectly possible without legislation. Without franchising, the Railways Act does not apply and there is no European legislation– despite what some politicians have said – forcing the government to franchise the railways.

Moreover, pace Mr Griffiths’s concerns, the public bidder will be subject to a rigorous procedure and will not necessarily be favourite. Indeed, given that the other bidders will also include companies owned by state enterprises and therefore having access to cheap capital, it is doubtful whether the pubsect bidder will win any at all.

Then there is the politics. Bidding as we know, costs millions. An organisation will have to be created to run the bids, staffed with a bureaucracy and some expensive experts on operations, engineering, revenue, marketing and so on. It will probably not be able to attract really top grade people who will be offered more lucrative or exciting contracts elsewhere. The big state European companies have all these resources at their finger tips already and can easily establish bidding teams. The little old UK pubsect organisation will probably, therefore, get through tens of millions of pounds

All this is being set up to perpetuate a dysfunctional and expensive franchising system, still in intensive care following the West Coast debacle of 2012. As readers know, I have perpetually asked ‘what franchising is for?’ and think the system is expensive and inefficient. However, what Labour is proposing here is worse – and unworkable. It will lead to a political furore, alienate the train companies and waste money. What is more – everyone in the industry and everyone in the party who knows anything about the railways knows this. It is only Ed Balls, who has no particular interest in the railways or any feel for them, who is pushing this daft policy.

There are, actually, some other daft ideas in the Policy Forum document that are likely to end up in the manifesto. Labour wants to ‘tackle the monopoly market for rail rolling stock’ which seems to forget that we have been there before with Douglas Alexander’s expensive and failed attempt to regulate the roscos. It was the initial sale of the stock that was the scandal, but little can be done now. While some other ideas such as devolution – all the rage at the moment – and creating a single ‘guiding mind’ for the railway are sensible, it is the daft pubsect bidder commitment that will attract attention and is being set up to fail. My advice to Mary Creagh and her Labour colleagues is like those who warned Diana about marrying Charles – and were proved right ‘don’t do it’.


Virgin’s weekend first is second class


I have always puzzled over the fact that the Virgin Trains’ Pendolinos come up so strongly in passenger surveys. They have always been my least favourite train, not least because I am 6ft 2 and the non table seats are really cramped.

In order to try First Class at weekends, I asked for an upgrade (Virgin would not pay my ticket, which is fair enough) to use for a trip for me and my partner to Old Trafford which would normally cost £15 each way (oddly it is only £10 to Wolverhampton), though of course some people may unknowingly have paid the full first class price. It proved a disappointment. You get given a goody bag which consists of a few crisps, cheeselets, and some sweets including a packet of four, yes four, Tic Tacs. There was a small bottle of water, too. The staff were helpful and charming, though offered a cup of tea or coffee only once.

This is food for four year olds (my grandson got my return journey box). Why not the sort of thing you get on short haul airlines, since Richard Branson runs one, such as a sandwich and a piece of fruit?

Otherwise there was no benefit apart from the roomier seats. Moreover, Virgin had the usual toilet problem, a smell my partner unaccustomed to Virgin Trains, nauseating. Then there was a complete lack of a PA system on the way up, and the surfeit of announcements on the way down including the maddening security announcements about luggage and ‘telling a member of staff or a police officer’ twice at every station. Oddly, on my second trip to Manchester on the way up to conference, there were no irritating announcements – and barely any at all from a conductor who stayed firmly in his compartment all trip.

Indeed,, ticket checks are completely haphazard – only one on the four journeys. The reservation systems did not work on two of the trains and there were cleaners on only two of them. It is the inconsistency of the product from such a well known brand that I find surprising. Regardless of my prejudices about what one tweeter calls the Pongolinos, I would expect consistency and improvement, but now Virgin has a near three extension on its franchise to March 2017, it seems that there will not be any.


  • Malcolm Chainey

    I don’t think it has to be so difficult for Labour to devise a sensible policy. I’m convinced that the main reason for the unseemly haste in returning East Coast to the private sector is that its performance has become such an embarrassment to the other passenger TOCs. It may be that
    any franchise competition that is actively underway before the election is not possible to halt in the event that Mary Creagh becomes Secretary of State for Transport. (Of importance to us in the North, neither Northern and Transpennine Express get underway until 2016, but three bidders have been shortlisted for each and the ITTs are expected in December.) That still leaves other significant
    franchises that could be returned to the public sector on expiry. West Coast, for example, doesn’t get underway until the OJER notice is published next August according to the latest DfT rail franchise schedule. Having at least one franchise in public hands will assist DfT in understanding the economics of train operators. If it proves a success, then the argument for keeping other franchises in the private sector becomes that much weaker.

  • greypoplar1

    Labour seems to make a mess of railway policy every election. If were to propose restoration of a vertically-integrated structuire (whether called the British Railways Board or not) it could actually win votes, which are draining away at present. Many voters who could vote Tory in 2015 are not impressed with current policy, but Labour does little to attract them.

  • paulf78

    Christian please keep banging this drum as loudly as you can on Labour’s plans for a pubsect franchise bidder. There is a chance they will listen, but I’m not optimistic. As you’ve said before if a pubsect bidder wins there will be judicial reviews demanded because this could only happen due to bias in the bidding process (the private sector will never accept a pubsect bidder could ever win on its own merits – notwithstanding your points about how difficult+expensive this would be to achieve); and a losing pubsect bid would just waste £millions.

    Also lets put to one side that Labour had 13 years in power to resolve rail franchising (Your point about Gordon Brown and the Tube PPP, explained in detail in your book “Down the Tube”, is just one reason why they didn’t!), so again lets not get optimistic they will this time. Does anyone remember the SRA (with no S and no A)?

    Allowing franchises to lapse into DOR is the best way to achieve renationalisation, again as you’ve detailed at length. No primary legislation required and no need to pay a premium to buy private operators out of their existing contracts. I just fail to see why this idea is anti-business. Is it because private operators see rail franchises as an entitlement?

    It does look like, as you point out above, Labour are setting up their pubsect bidder idea deliberately to fail. That way they “prove” the idea of renationalisation (a policy that is apparently very popular) couldn’t possibly work. I would be interested to know what ideological or “paid for lobbying” thinking is behind this policy.

    An alternative slant to all this. Just think if history had been different and we still had a BR in some form; possibly as a private enterprise but certainly not smashed into 100 bits as it was. Perhaps it would be out bidding for rail contracts in other parts of Europe as DB/SNCF/Abellio are doing here now?

    A PS. We rode Virgin when doing a bit of track bashing back in August – the Blockade Bashers from Euston to Birmingham International via High Wycombe during the Watford Junction possessions.
    These were Super Voyagers so no stinky toilets thankfully, but I concur on the Weekend First Class upgrade. £10 didn’t buy much – a box of kids snacks and a bigger seat. The staff were friendly and attentive enough but the snack box left a lot to be desired!

  • Paul Holt

    The important related article is not Rail 754 but this one (plus its comments): http://www.christianwolmar.co.uk/2014/05/go-on-ed-be-brave-and-end-franchising/

  • Jay Blanc

    It’s become “industry standard” on UK railways to run a reduced service in First class on weekends, bank holidays and the weeks around christmas and new year. At the same time, offering ‘cheap’ upgrades to this reduced service. For instance, Week days on a CrossCountry first class service, you can usually get a sandwich or hot meal during meal times, a cup of coffee and some fruitcake or biscuits. On weekends you can get a cup of coffee and some fruitcake.

  • RapidAssistant

    It amazes me how some Tories always quote some apparent and obscure European restrictions to justify keeping the present franchising arrangements in place, yet many of those same Tories are quite happy to see us leave the EU altogether – therefore we would no longer be bound by any of those restrictions anymore. Funny how Europe suits Euro-sceptics when it fits their own ideology…..rant over.

    Re – Pongolinos (was it me who you were surreptitiously quoting on Twitter there CW? – as I used the term quite a lot!). Had my first journey (Euston-Edinburgh) on one for a good five years…..I got the usual blurb emails from Virgin that they had a lot of new things to excite us with. But the experience was the same as before. Cramped seat next to a wall, toilet odour in the vestibule and that irritating automated announcement system at every station they’ve now put in. At least it wasn’t delayed and it was £30 cheaper than East Coast (which I would have normally taken, but a bargain is a bargain….)

    First class service on VT (even during the week, according to friends that use it fairly often) is a far cry from 6-7 years ago when they were still being subsidized by the government, back then you got decent hot meals and “free” booze was being dished out quite liberally.

    PS: Branson is grounding his short-haul airline…..never tried it but surely he may have realized that his predecessor on those routes (British Midland) was losing money hand over fist – BA loses money on them as well – but largely runs them as a necessary evil to feed their long haul network.