Rail 631: Are longer franchises really the answer?


At last, a debate about the future of franchising is emerging. The Association of Train Operating Companies has, commendably, issued a package of measures on how it would like franchising to change. This followed hot on the heels of the government’s response to the Commons Transport Committee’s report on franchising published in the summer which gave some rare pointers to government thinking on the issue.

 Briefly, the ATOC plan – which it says needs to be implemented as a whole – involves a shift of emphasis towards giving more responsibility and scope to the train operators. It is seeking more flexibility and less ‘micro management’, longer franchises, allocation of franchises on quality not just price, better risk sharing, giving operators ability to invest in station improvements and the like, and reversing the trend to larger franchises to retain a mix.

 It is an excellent pitch for a refocusing of the franchise system, aimed I suspect more at a potential Tory government than the current Labour one. While much of it, at first glance, makes sense, the problems arise when trying to work through the implications of what ATOC is seeking.

 Take micro management. If one could trust the train operators to deliver a consistent service and not to quibble over every extra penny they have to spend in order to meet the Department’s requirements, then fine, they could have the freedom to run their franchises in a grown up way. But it comes down to trust, and so far it seems that every time the going gets tough, services and facilities are withdrawn as quickly as possible in order to keep the franchise profitable. Or, as we have seen with National Express East Coast, they just throw the towel in. That is why Lord Adonis, when I interviewed him earlier this year,  strongly justified micromanagement on the basis that it was necessary to protect public investment in the railways.

 The same problem arises over longer franchises and revenue risk. Essentially, under the current system, the operator takes all the revenue risk – in other words, keeps all the ticket income – for the first three or four years, and then it is shared under the capping arrangements which mean that 80 per cent of the loss of revenue is guaranteed by extra government subsidy (and, of course, the converse, which is that in particularly good times 80 per cent of extra ticket sales beyond a certain target  will go to the government. ATOC wants a system where the risk is better shared. It suggests that there should be indexation against GDP so that the variation in revenue that comes from the state of the economy is borne by government, not the operator.

 That is eminently sensible. It was ridiculous that the operators made super profits just because GDP was growing, and equally it makes no sense that they are now all struggling simply because of the wider state of the economy. Michael Roberts, the head of ATOC, has previously said that there seemed little point in passing the GDP risk onto the private sector, although, of course, many shareholders of the operators have benefitted enormously from it.

 However, achieving the right balance of risk between the public and private sectors is fraught with difficulty particularly with longer franchises. ATOC itself admits that ‘increased stability of tenure from long franchises should not mean certainty of tenure’ In other words, franchises should still be removed from poorly-managed companies. But how can this be done if the operator has greater flexibility and there is not some level of micromanagement? In order to be in a position to force a failing operator out, the Department will have to monitor the situation closely, precisely what ATOC does not want.

 Similar issues of complexity arise over investment. The train operators want to have more control over stations and depots, and rolling stock procurement. In a way that is eminently sensible. It was always daft that the stations belonged to Network Rail rather than the operator, a structure that arose because of the hurried drawing up of the 1993 legislation creating the privatised railway (ministers realised too late that it was a mistake when it would have been too difficult to change).

 However, again the devil is in the detail – how would such investment in, say, car parking ultimately be paid for and who would compensate the operator once the franchise ran out? The most sensible option, of course, is for vertical integration but I have a self-imposed ban on mentioning that more than once a year!

 Similarly, take rolling stock. The train operators complain that decisions are taken by the Department. I have some sympathy with the notion that they are at times best able to judge whether there is a need for extra trains. However, in the present fragmented structure with 20 operators, only the Department can have the overall vision to balance public investment – most rolling stock has to be subsidised – with the needs of the franchises. Look at Lord Adonis’s ingenious electrification scheme for the Great Western line that involves cascading stock from Thameslink.

 The ATOC suggestions are a mix of the clearly self-interested – one response in government circles was ‘they would say that, wouldn’t they’ – and a genuine attempt to set out a more sensible franchising regime. ATOC might have done better by trying to respond directly to the stated government agenda which, was set out more clearly than before in its response to the select committee’s report. It said: ‘The system has to achieve a good balance between many different aims: it should deliver value and certainty for taxpayers alongside protected service quality for passengers; it must balance being affordable in the short term with investing for longer-term benefits; it should be able to cope with change on the network, such as major projects, and changes in policy aims; it should encourage, rather than stifle, sensible investments and improvements and manage them efficiently and it must deliver acceptable outcomes under different economic conditions.’

 The problem is that there is an underlying conflict between government’s desire to protect the public interest and the train operators need to make decent profits. The franchising structure is all about reconciling these interests. Apparently, according to ATOC, the Department spends £24m each year on consultants to oversee the franchising system. If any of these oh so clever consultants could come up with a workable structure for franchising, then perhaps they would be worth those millions. Now that’s a challenge.



Announcement madness


I try not to ride my little hobby horses too often in this column but the subject of announcements keeps on cropping up in conversations I have with ordinary rail users and my recent experience just confirms that a rethink on the policy – or indeed a policy – is desperately needed.

 On a Sunday journey from London to Folkestone the other day, I took advantage of the Kent, high speed domestic services preview, partly because my publishers were paying for the ticket which is sold at a premium, something I will discuss in a future column. The near empty Hitachi train sped comfortably through to Ashford, with no suggestion of the poor ride which other commentators have mentioned. However the automatic announcements were, quite simply, making it impossible to relax. It was reasonably ok up to Ebbsfleet but then it got truly crazy. Every couple of minutes or so, the announcer would say: ‘This is the train to Ashford International. It will stop at [slight pause] Ashford International. The next stop is [slight pause] Ashford International’ This would be bad enough once or twice, but it played six times – perhaps more as I tried to read my newspaper – in the space of a 20 minutes journey. Is this a record? Clearly there should be a message which says: ‘The next stop is Ashford International where the train will terminate’ but whoever has programmed the computer has not taken into account the fact that the type of message should be changed for the last stop.

 The nadir was the automatic announcement that a catering service would be going through the train and would people ensure – on the near empty train – that their baggage was not in the way. This was followed quickly by the embarrassed conductor saying ‘there is no catering service on this train’!

 He told me afterwards that the train was still in its test phase and that it would be sorted out when the full service starts in December. However, since he added that there was no facility for the guard to override the automatic announcements on the train, I cannot share his optimism. Southeastern will have to be very proactive in order to ensure that this madness stops and I suspect that the company will be too terrified of ‘elf and safety’ to dare to change anything.

 Having eschewed the high speed service on the way back, to sample an ordinary train where there were many fewer unobtrusive announcements – though still a couple of unnecessary ones from the guard about ‘keeping all your belongings with you at all times’ and reporting anything suspicious, I left the train at London Bridge only to be greeted with two immediate announcements concerning suspicious packages and then, on a dry day, ‘the surfaces may be slippery’. These rear-end guarding announcements are not only irritating, taking attention away from more important ones about trains, but also are simply counter productive, as everyone ignores them.

  So my suggestion is for an ‘announcements working party’ – in the style of the stations review – led by the train operators because they are the customer facing organisations, but with representatives from various other organisations, including the Office of Rail Regulation, the Department for Transport, the British Transport Police, and Network Rail – with perhaps advisors from the Noise Abatement Society. Now that would shut them up!

Scroll to Top