Can the railways be decentralised?

Localism, decentralisation, devolution – these words have become the motherhood and apple pie of the Coalition government. They are, after all, popular concepts. The idea of being closer to the centres of decision making is universally appealing and no politicians have ever dared to boast that they would like to centralise power more, even though that is what successive governments have done.

However, transforming these fashionable concepts into reality for transport, especially the railways, is no easy matter. In March, the government issued a consultation document Rail Decentralisation, which received little attention because it was published at the same time as the Command Paper on the future of the railways.

The consultation paper is very much part of the wider agenda on localism and therefore the government seems genuinely committed to the idea. However, no blueprint is set out and there is a rather tentative feel to the Consultation Paper as it presents a wide range of options that might be applied to different situations. Decentralisation, says the paper, is being considered because ‘local decision makes may be well placed to recognise trends in usage and demand’ and to assess that may affect local needs. These local bodies are, too, ‘able to compare the benefits of expenditure on different types of transport provision’. This suggests that in an ideal world, the Department would allocate a sum of money to local councils – or groups of them – to spend as they please.

However, there are two fundamental issues which raise doubts about whether this is feasible. First, would the Department – or rather the Treasury – ever genuinely let go of so much power without setting strict rules and guidelines? That would be almost unprecedented. Secondly, there is the question of precisely how much money, compared with present arrangements, would the Department allocate?

The paper considers a wide range of models and each one raises its own complexities. There has already been, of course, some decentralisation of decision-making on the railways and the results have generally been positive. In Scotland, responsibility for the Scotrail franchise was transferred from London to Edinburgh and not only has there been a couple of major reopenings but the current Scottish government is very keen on seeing further considerable investment in the network.

London, too, has been able to benefit from a partial decentralisation. Soon after it was created in 2000, Transport for London established a rail division which initially had no lines under its control. But through concerted lobbying, TfL gained control over bits of the old Silverlink franchise together with a revamped and extended East London Line to create London Overground. This is let out as a concession, rather than a franchise, since the revenue risk is retained by TfL, making it a different model from the standard Department for Transport arrangement.

The Passenger Transport Executives which support services in six English conurbations have been a remarkable success story. As Chris Austin, a former BR press officer, put it recently in Railwatch, PTEs have created bigger and busier networks around our great cities than British Rail would have been able to sustain on its own’. In other words, localism boosts rail investment and rail use.

So far, though, only PTE has been given control of the franchise process.  Since 2003, the franchise for Merseyrail Electrics has been the responsibility of the local PTE, rather than the Department for Transport, and this is one of the models which is under consideration during the consultation process. However, replicating the scheme to other passenger transport executives is not a simple matter as their networks are part of the large Northern franchise which operates both local and regional trains, whereas on Merseyrail is virtually a self-contained network.

Indeed, what to do about Northern Rail is the biggest issue on the decentralisation agenda offering both the best opportunity for a radical change but also raising the widest range of potential obstacles. The Consultation Paper offers little detail on how this new arrangement might work. As Jonathan Bray, the director of the Passenger Transport Executive Group,  puts it, ‘it is great that the process of decentralisation seems to be very open ended, but that also poses problems. We are not quite sure what we are dealing with and we need to know the detail before we can decide whether it is what we want’. Indeed, the local politicians would be reluctant to take on a vast swathe of new responsibilities without knowing the precise financial details of the scheme. There have already been discussions and the obvious first step would be to devolve power over issuing franchises from the Department to some sort of local body.

The Northern franchise covers a ragbag of routes principally in Yorkshire and Lancashire and includes both regional and urban commuter routes. It encompasses five of the six English Passenger Transport Executives and is the most heavily subsidised franchise, costing taxpayers more than £250m annually. Currently PTEs are co-signatories to the franchises (except in the West Midlands) and receive funding from the Department to pay for services which has given them some role in specifying timetables and routes.

Under decentralisation, however, the PTEs would have total control of the franchise, paid for partly from a grant from the Department, but presumably topped up from their own resources. But that begs the question of exactly who would be the local agency to run the franchise? Mr Bray suggests it might be some kind of new larger supra-PTE created specially to run the franchise: ‘It might be like a Strategic Rail Authority for the North. The PTEs could get together and form a united body which would manage the franchise.’ As with everything in this story there are complications. Services which are run entirely within one PTE would remain their responsibility, funded by them. The larger confederation, therefore, would only specify the regional services and longer commuter routes. There would undoubtedly be difficulties in getting its various members, who are used to batting for their own local issues, to sing from the same hymn sheet. Indeed, one reason why Labour government ministers were reluctant to return bus services to local control by councillors was precisely because they were sceptical of the local politicians’ ability to make decisions informed by strategic rather than purely local considerations.

One suggestion that is not on the table but which could be considered is the notion that rather than letting the franchise out, which is very heavily subsidised, the lines could be run directly by the new consortium of passenger transport executives and local councils. Timing, though, is a problem. The current franchise, extended last year, runs only until September 2013 and therefore the bidding process will have to start soon. Northern is already a complicated franchise, covering a vast swathe of territory with 2,600 trains per day, more than any other operator, and there is speculation that it will be merged with the Transpennine Express franchise, which will have the effect of reducing subsidy per passenger but will add further complexity to the mix.

Investment is key. Many services in the North are still run using ghastly Pacer trains which were a cheap option chosen by British Rail to enable it to keep lines open, but their ‘bus on tracks’ type design is well past its sell by date. A new fleet to replace the current 100 Pacers still in use would require at least £300m, and probably more to allow for expansion. Clearly the PTEs would not want to take on this burden if they were not assured that funding were available from central government or they would be given borrowing rights.

In Wales, the issues are also complex but somewhat different. The Welsh Assembly Government is also looking at the possibility of taking over the franchise, or even quite possibly simply operating the trains itself, though again this is an issue fraught with complexity. Here, because the franchise does not run out until 2018, there is more time to thrash out a new arrangement and the WAG is currently considering various options. As with the other areas seeking devolution, this is motivated by a desire to attract extra investment into the system, with plans, for example, to electrify the Welsh valley lines.

The experience of decentralisation has been nearly all positive and for the most part resulted in extra investment for rail which is seen as popular with voters. The London Overground, for example, with its new trains and improved track, has been a fantastic boon for travellers on the North and East London lines, and numbers have soared forcing TfL to increase service frequencies and examine a deal to extend the trains with additional carriages.

This time, though, one of the reasons for the hesitation by some local authorities about taking on more responsibility for rail funding, even if it does start with a large legacy payment from the Department, is the risk that the money will dry up and then the local bodies will get blamed for cuts. Richard Burningham of the Devon and Cornwall Community Rail Partnership says that the two counties have been supportive of rail initiatives in the past and have been in discussions with the Department about taking on responsibility for local services. However, he says, ‘they are very worried about the financial risk not only about maintaining existing levels of service, but also for any expansion schemes. Who would pay for growth?’ Given the financial constraints facing local authorities and the fact that the railways themselves are under pressure, following the McNulty report on the industry’s finances published last year, to cut costs by around 30 per cent by the end of the decade, that is hardly surprising.

The timetable is particularly tight to make radical changes in Devon and Cornwall as the franchise is already well into the renewal process. Four companies have already prequalified – Stagecoach, Arriva, First and National Express – and the detailed specification – the Invitation to Tender – is due to be published this month [July]. However, it is very unlikely that a new arrangement for funding the regional services in the westernmost two counties of what is a very large franchise could be drawn up and concluded before the start of the new contract, which is scheduled for next year. Therefore, for any progress to be made, the Invitation to Tender will have to include some flexibility over these services, but that may well add to costs since any successful bidder is unlikely to be happy at the prospect of losing control over part of the network. Moreover, the through trains to London from Penzance and Plymouth will not be included in the local funding arrangements, and therefore there will need to be fares allocation, which again adds to complexity.

It is precisely such fears over finances, together with the myriad of complexities and uncertainties raised by the franchise process, that may sound the death knell for any of these exciting schemes. In a way they have come at the wrong time as the Labour government missed the boat.  Such changes are always best undertaken in times of plenty when organisations taking on new responsibilities can be compensated – bribed even – with extra cash as seed funding. Given that this localism agenda is likely to be undertaken under existing legislation and without any new statutory underpinning, the Department must be able to persuade local authorities that the risk is worth taking in these austere times. It will be an uphill task but given the past experience of decentralisation, the effort might well prove beneficial for passengers.


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