New London franchise may point the way to the future

Almost unnoticed, London is benefiting from a massive investment programme in its railways. While the decision to go ahead with Crossrail, estimated to cost £16bn, and the opening of St Pancras attracted the headlines, work is already underway on several other schemes in the capital.

The Thameslink station underneath King’s Cross, which was belatedly funded by the Department for Transport, is scheduled to open in early December while work has also started on the Thameslink upgrade itself with platform lengthening at Luton Parkway. While the scheme will now proceed in stages, the government does seem, at last, to be committed to a project whose original name, Thameslink 2000, betrays the level of delays and which originally was supposed to have been delivered by Railtrack as the company was let off part of the railways debt to pay for it!

Meanwhile, work is progressing on both the East London Line and on the Docklands Light Railway extension across the river to Woolwich Arsenal. The DLR story is interesting as it is in sharp contrast to Crossrail. It started out twenty years ago as a Mickey Mouse railway linking a rather inaccessible station on the edge of the City with Stratford in East London and Island Gardens on the Isle of Dogs at a cost of just £77m. Now it has quietly become a major railway carrying over one million passengers per week thanks to several extensions and investment to boost capacity. This piecemeal approach contrasts completely with the Crossrail and perhaps suggests that it may ultimately be cheaper and more efficient to make smaller incremental improvements than to go for a big bang approach.

All of this is happening in a remarkably haphazard way. There seems to be little attempt to coordinate these developments, apart from trying to ensure that they are (mostly) ready for the Olympics or, at least, do not get in their way. While Transport for London has set out transport plans for 2025, it does not hold all the levers and therefore there is no overall body coordinating these projects.

However, that may be about to change as the Mayor has been given his own train set to play with following the handover on November 11th of part of the old Silverlink franchise to a new operator, MTR which was selected by Transport for London, rather than the Department. This railway includes the North London line including the Gospel Oak – Barking branch as well as local services to Watford from Euston and will incorporate the East London Line once it is completed in 2010.

This is a major development in Livingstone’s attempts to create an integrated transport system for the capital. Indeed, it may be a precursor to a fundamental change in the way that rail services in the capital are provided in future and marks a major concession towards local control by the government.

It is important to stress that this is a very different type of franchise as the regime for operators on the national rail network. TfL has been allowed to specify the staffing levels, control the investment and, most importantly, set the fares to ensure the service can be part of the Oyster scheme. The train operators are watching with some concern as they are adamant that they want to retain the right to keep revenue risk because they see that as their main way of making money.

The unions, on the other hand, would have liked TfL to have gone one step further and simply run the franchise itself, as it does the Underground. However, the Department insisted that there should be a franchise in order to retain a measure of flexibility, doublespeak for not wanting the operational practices to be hamstrung by all the existing agreements with the unions.

The trains, too, although paid for by TfL, will also be leased from a consortium of National Australia Bank and Sumitomo Mitsubishi Bank rather than owned directly because that is a more tax efficient way under the daft rules set created by the Treasury.

The new franchise arrangement puts the unions in a difficult position. Ken Livingstone has stated firmly that he would like to see the rest of the London suburban franchises come under the control of Transport for London. But first he must show that he can run this new London Overground successfully. It is not a cheap option. Extra money is being spent on staffing the stations, introducing Oyster and improving the service but if the unions do not cooperate, the Department may well decide the experiment is not worth pursuing. The unions therefore must decide whether to accept this halfway house between a nationalised and privatised system or keep on pressing for full renationalisation.

In truth, this new type of franchise is another example of the way that the railway is being renationalised by stealth, with the borders between public and private sectors becoming increasingly blurred. Already, much of the rail network is effectively renationalised: Network Rail is already to all intents and purposes a public sector company and the Department for Transport now exerts more control over the train operators than it did British Rail.

All this is being watched, too, from the sidelines by the Passenger Transport Authorities outside London. They feel, with some justification, that they are losing out to the capital. Their tram schemes, often drawn up with encouragement from central government, have been almost all scrapped and on Tyneside, Nexus is battling hard to obtain funds to refurbish the its metro system. Moreover, the role of the Passenger Transport Authorities in drawing up franchises was reduced in the Railways Act 2004. If the London model proves successful, however, they are likely to seek much more local control over their transport finances and will demand similar powers over their local railway services.

Much therefore rests on Transport for London’s ability to manage a franchised railway. In MTR they have an experienced partner whose Hong Kong underground is one of the most profitable and efficient in the world which augurs well for its success. If it succeeds, then the other operators of train services in and around the capital will undoubtedly worry that their lucrative contracts based on taking the revenue risk will be under threat and the long march towards gradual renationalisation will continue.

Christian Wolmar is author of Fire and Steam, a new history of the railways in Britain, published by Atlantic Books

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