What now? Despite the length of the hustings, none of the questions about the future of the industry have been answered. I am of course writing this before the result is known but unless a late scandal emerged of a Shadow Cabinet paedophile ring, my assumption Keir Starmer is now safely ensconced in Downing Street.
From my numerous conversations with key players in the industry, uncertainty is the overriding feeling in the industry, even among those who will be directly affected by Labour’s plans to move the franchises back in house. An article in the Sunday Times on June 30th which included an interview with Louise Haigh was well informed but still failed to answer fundamental questions about how plans for the future of the railways will play out in the coming months.
While ‘taking over the franchises’ seems a simple enough concept, it does not take much digging to realise the complexity of the task. One key imponderable is the attitude of the companies which will no longer have a role in the business. It is worth noting, here, that already several have thrown the towel in or been gently pushed out such as Stagecoach and National Express. And there has not been exactly an influx of those waiting on the substitutes bench to join the fray. There is even speculation that while some players may simply not bother trying to remain in the business others may fight to the last and ‘lawyer up’.
Interestingly, the newest boy on the block is Transport UK, a management buy out team which took over Abellio’s franchises at the beginning of last year. By chance, the first two franchises which would be the subject of a take over by the new government are Greater Anglia and West Midlands, owned by Transport UK and which both come up for review in September. Unlike some owning groups, Transport UK seem to have taken a conciliatory approach to Labour’s plans so far but the imminent loss of these two deals which, in fact, represent the great majority of its turnover, apart from London bus contracts, may mean the company will try to prolong the current arrangement as long as possible. In line with past practice, the company could have normally expected to receive a two year extension based on their good performance record.
Until now, the franchises which have been taken over into the Operator of Last Resort have either got into financial or performance difficulties – East Coast, Northern, TransPennine Express – or been the subject of major fraud investigations – SouthEastern. There is no legal basis for the government to simply take over a franchise contract because which under current legislation are supposed to be privatised. Certainly, from my conversations with industry insiders, there is a uncertainty about the legal ramifications of Labour’s plans. Labour ministers will point out that the railways in Scotland and Wales have effectively been nationalised while East Coast has been run by the Operator of Last Resort since 2018, but this may not be sufficient to prevent a challenge from Rail Partners, the association of railway companies which has been very aggressive in its statements about Labour’s plans. Indeed, I understand that there are numerous law firms the City which have been asked to look at the legality of Labour plans. The view among some owning groups is that Labour cannot push through these plans without legislation, and that rather than using the Operator of Last Resort, the franchises will have to be taken over by the Great British Railways, which will need a statutory footing. Well, at least there will be plenty to write about for this column!
There is certainly a stronger case for Labour’s desire to put an end to Avanti’s misery on the West Coast. Louise Haigh, expected to take over as transport secretary, has long had her eyes on the poor performing Avanti which was only allowed to continue by the Conservative government as it did not want to be seen to renationalising such a major contract as it would have been seen as supporting Labour’s plans. However, West Coast a major and complex franchise that is not an ideal candidate for the first Labour takeover. The plan is to use the current Operator of Last Resort, which already controls four franchises and which appears to be about to be renamed as National Train Operator (NTO). This will be a significant burden for the operator both because of the mess that Avanti is in and the inherent difficulties of reducing delays and cancellations. At root, there is the issue of Sunday and rest day working which cannot be resolved without cooperation from the trade unions. Even if the unions are prepared to treat a Labour government rather more kindly than its predecessor, this will still come at a cost, possibly one that is too heavy for the new administration’s parlous finances.
FirstGroup which has a major stake in Avanti as well as controlling South West Trains and Great Western seems to be hedging its bets. As well as being quite aggressive behind the scenes opposing Labour’s planned takeover, it has also been strongly promoting the concept of open access. The cutbacks in the timetable means there are paths available and therefore bidders have been seeking to fill them with open access bids, most prominently FirstGroup. There is disquiet in the Department for Transport about whether FirstGroup’s focus on open access is in conflict with its role as the major shareholder in Avanti, not least because Steve Montgomery, its managing director is now focussing on open access.
And this puts the spotlight on the contradictions inherent in Labour’s stated policies. Labour’s manifesto extols the virtues of open access despite the fact that essential these operators provide a very limited service to a few destinations and, despite the efforts of the regulator, inevitably abstract passengers and revenue from the franchisees. They do not pay the full cost of their access and therefore are being cross subsidised by the main operators whose revenue, even before they are renationalised, all goes to the government.
This is the trap of trying to please everyone which Labour more widely has fallen into. Just look at its fawning statements about how cars are the key to our transport system and how taken the driving test is a coming of age for young people – have they not noticed that teenage drivers pay such exorbitant insurance that only the well-heeled can afford to get behind the wheel. They can’t emphasise the importance of moving towards more sustainable forms of transport while also suggesting that driving will always be the most important way of getting around. Choices have to be made and that certainly applies to open access as well. Trying to please everyone will end up pleasing no one. That should be Labour’s starting point when it assumes office.
The HS2 conundrum
As usual transport policy has been the dog that didn’t bark in this election. I’ve been writing about transport since the mid 1990s and this has been the case in every election but it has been a bit surprising given that Rishi Sunak made HS2 the central theme of what was his final conference speech as Prime Minister.
HS2 has been described to me as the biggest infrastructure scandal this country has ever seen, and it is difficult to disagree with that conclusion. I am beginning to research this long saga for a potential book and there is no doubt that the sums of money which have been wasted on the scheme are unprecedented. And yet there has been silence on the project during the hustings, not least because Labour has little idea about what to do about it. As Michael Holden wrote a couple of issues ago, the project cannot be left as the Acton to Aston shuttle. Even as someone who opposed the scheme right from the start, it is clear that the extensions at both ends need to be completed but, at the same time, it is difficult to see how this can be done. It is easier and more politically palatable to push forward a scheme to complete the northern section to Manchester or thereabouts, possibly by endorsing the idea of making use of Pendolinos on the southern HS2 section.
Resolving Euston is much more politically difficult as the idea that this can be done with private money is pure fantasy. Huw Merriman, the outgoing rail minister, was just about to give the go ahead for the tunnel boring from Old Oak Common to Euston when Sunak announced the election. That would have made life easier for the government of Keir Starmer, not least because Euston is in his constituency which means that reinstating the scheme will look like pork barrel politics. Ultimately, though there is little choice but to reach Euston, even if initially the terminus consists of just a shed and half a dozen platforms. HS2, though, is just one of dozens of decisions Starmer will need to make in the early days of the government but it is vital that it is not just ignored as that will lead to yet more cost. Getting trains running along the line will have a huge PR impact, just as the extra costs of Crossrail have now already been forgotten given the success of the Elizabeth Line. Admittedly, HS2 is a far bigger project and will always be remembered as shockingly expensive, but nevertheless some of that will be forgotten in the excitement of having a major new train service.