Wales & Borders Franchise Consultation

[Gareth Marston]

Sadly not surprised given the protagonists involved. As my AM Russel George has said the only losers will be the passengers to that we can add the economy.

Grayling is an ideological blunderbuss stamping his feet and sucking his thumb but it appears that the Welsh Government is far from innocent and has been demanding extra money and not completing all its work also NR seem to be far from happy with "core valley lines" (the original letter is scanned into the Western Mail article).

The prospect of having an hourly Cardiff to Holyhead service plus the Metro as the only improvements was always going to go down like fart in a space suite in Herefordshire, Shropshire and Cheshire. I suspect they have bent Grayling ear esp as Owen Paterson MP from North Shropshire is a chum.

 

[northwichcat]

If Cardiff Bay thought they would get an easy ride they were very much mistaken.

They should have realised that even though the Conservatives say they are in favour of regional devolution that the new Northern, TPE and LM franchises are only partly devolved.

How about a 1-year Direct Award to ATW to kick the ball down the road?

I wonder if that could be a blessing in disguise for some routes e.g. it might help speed up Pacer/153 replacement and if Chester-Liverpool gets included then it could be up to bidders of the next franchise to decide if those services should originate from somewhere in North Wales in their bids?

Although, it could slow down the process of obtaining extra capacity on some routes e.g. Manchester to Cardiff.

 

[Bletchleyite]

They should have realised that even though the Conservatives say they are in favour of regional devolution that the new Northern, TPE and LM franchises are only partly devolved.

For clarity, the Tories favour someone else paying. They don't like handing over control. If they wanted to do that, for example, they'd abolish the block grant, stop capping Councils and let local democracy work properly.

 

[Gareth Marston]

Is this just political handbags because anything devolved or wanting to be devolved is simply not in Tory voting areas? Would it be a different kettle of fish with Conservatives in power at the Bay?

However it if was a Labour government in Westminster doing similar , Welsh Labour woudl roll over and be tickled on their belly much like they did when the current franchise was let.

 

[gareth950]

How about a 1-year Direct Award to ATW to kick the ball down the road?

That would only take it to October 2019. I'd go further and say an 18 month - 2 year direct award is needed, taking it in to 2020, with the conditions that:

ATW are responsible for getting Wales' fleet 2020 compliant. This includes complete Pacer replacement by December 2019.
ATW must also take on additional extra trains to boost capacity, the most likely trains for this would be 769s or any other diesel converted EMU.
And, ideally, a complete interior refurbishment of the 175s.

Of course there's the possibility Arriva will say 'no thanks' and walk away as it involves them spending money, so then DOR would have to come in.

It needs to be a new direct award (not a franchise extension) that immediately starts to address the most pressing and urgent issues in Wales: 2020 compliance, Pacer replacement and overcrowding.

Meanwhile the politicians can be left to continue arguing.

 

[LNW-GW Joint]

Which must be very frustrating for the Welsh Govt, as it was agreed by the DfT
last October that the cross border English services were staying in the franchise, no problem.

I don't think it's the placement within the W&B franchise that's the problem.
It will be the relative costs/subsidies which are at issues.
Grayling won't want English counties subsidising Welsh services, but that is exactly what WG wants.
There's a very complicated formula for devolved funding, and the rail franchise will cut across all that.

Grayling also wants WG to run the bid and let the franchise on the same terms that DfT would (acting on his behalf), whereas WG wants to rip up the rules and do it the "Labour" way.
Hence the dark threats of WG being "at risk" if it goes ahead without DfT approval.

 

[Gareth Marston]

I don't think it's the placement within the W&B franchise that's the problem.
It will be the relative costs/subsidies which are at issues.
Grayling won't want English counties subsidising Welsh services, but that is exactly what WG wants.
There's a very complicated formula for devolved funding, and the rail franchise will cut across all that.

Grayling also wants WG to run the bid and let the franchise on the same terms that DfT would (acting on his behalf), whereas WG wants to rip up the rules and do it the "Labour" way.
Hence the dark threats of WG being "at risk" if it goes ahead without DfT approval.

If I've understood this correctly at the moment WG give ATW their subsidy which in turn they get from Westminster. ATW pay a premium to DFT each yes r nominally for the profitable English bits. WG are now asking for this sum to go to them in addition to the amount in the block grant they currently subsidise ATW with?

 

[Severn40]

Given today's news over the Wales and Border franchise, just registered now and a need to comment.

Today's spat between Grayling and the Welsh Government is pure politics and does absolutely nothing to improve the rail network for the Wales and Borders passenger. All it does is to create uncertainty and the much wanted improvements seem further away.

Both are at fault. The Welsh Government has spent a long time talking about the vision and glossing over the practicalities and detail. Grayling does have a point about the asset transfer of the core valleys network and it does raise a lot of questions about the governance/consenting regime/management of risk. I would have preferred the Welsh Government to have gone for a short franchise that would delivered (finally) some modest improvements and build up some expertise in managing such a process. This would have ironed out, hopefully, some of the cross border issues and funding for instance.

But we are where we are. Grayling's intervention is pure spanner in the works. Political dogma at its best. It seems to be a case of devolution but only on my terms. The Welsh Government is justified in wanting as much ownership of the process given the flawed 'no growth' franchise that has saddled this part of the network for the past 15 years.

Unfortunately, I can't see an early resolution and so the prospects of the Wales and Borders franchise tender going ahead within the next few weeks are bleak.

 

[Gareth Marston]

Welsh Conservative leader Andrew R T Davies whose been in hiding since Grayling cancelled the wires is trying to put blame on Welsh Labour Minidters...,

http://www.bbc.co.uk/news/av/uk-wal...ail-franchise-welsh-ministers-not-up-to-speed

Regulated fares going up 3.9% "to pay for investment" will really be taking the **** with this going on or off whatever the right description is!

 

[Greybeard33]

If I've understood this correctly at the moment WG give ATW their subsidy which in turn they get from Westminster. ATW pay a premium to DFT each yes r nominally for the profitable English bits. WG are now asking for this sum to go to them in addition to the amount in the block grant they currently subsidise ATW with?

The subsidy/premium arrangements for ATW were explained in this thread from 2012. The WG forwards a fixed annual subsidy of around £170m to ATW, which is funded via the block grant from Westminster. ATW then pays a variable premium directly back to the UK DfT. According to this WalesOnline story, the net subsidy fell to £110m pa in 2015, so presumably the £67m pa at issue is the current premium. It would seem that the DfT is offering to fund around £100m pa, i.e. the current net cost of the franchise, but the WG is demanding the gross £170m it currently receives, while planning to keep any future premiums for itself. No doubt the DfT argues that the premium is generated mainly by the profitable routes within England.

This is a serious amount of money at issue. It seems extraordinary that both sides have allowed such a fundamental point of disagreement to fester until this late stage in the devolution negotiations.

 

[gareth950]

Hasn't it always been the case with this franchise that the more profitable cross border routes have 'subsidised' the less profitable routes and so have kept the whole franchise viable?

 

[158756]

It is ridiculous that a TOC in receipt of a subsidy should then pay a premium as well.

I'd be very surprised if the border services (2/3 coach DMUs running through lots of sparsely populated countryside not particularly quickly and not serving London) were profitable by any measure, and certainly not to the tune of £67m per year.

What would make sense would be if the franchise agreement envisaged fewer passengers and so a payment of £170m but the franchise 'only' loses £110m now. (Though of course the true costs are far higher)

 

[LNW-GW Joint]

Hasn't it always been the case with this franchise that the more profitable cross border routes have 'subsidised' the less profitable routes and so have kept the whole franchise viable?

Yes, but it's the mechanism of cross-charging between DfT and WG which is the issue going forward.
We don't really know the performance of the various routes.
It's impossible to split many of them anyway.
Life was simpler before the W&B franchise was invented.

 

[Envoy]

It is ridiculous that a TOC in receipt of a subsidy should then pay a premium as well.

I'd be very surprised if the border services (2/3 coach DMUs running through lots of sparsely populated countryside not particularly quickly and not serving London) were profitable by any measure, and certainly not to the tune of £67m per year.

The Marches Line through the border country links densely populated south Wales with the densely populated NW of England. Whilst it is true that the border counties are sparsely populated by British standards, they do include the sizeable communities at Hereford and Shrewsbury. The Marches Line is the shortest and quickest way between Cardiff/Newport and NW England and the WCML at Crewe - which, of course, has onward connections going up to Scotland. Using Cross Country services via Birmingham takes longer.

 

[gareth950]

It is ridiculous that a TOC in receipt of a subsidy should then pay a premium as well.

I'd be very surprised if the border services (2/3 coach DMUs running through lots of sparsely populated countryside not particularly quickly and not serving London) were profitable by any measure, and certainly not to the tune of £67m per year.

What would make sense would be if the franchise agreement envisaged fewer passengers

You obviously don't understand the situation in Wales. Passenger numbers are rising year on year and overall the number of passengers in Wales has increased from 18 million in 2006 to 30 million now and are expected to continue rising. This despite the current 'no growth' franchise that has stopped any action being taken to tackle the chronic overcrowding on many routes in Wales, apart from the WAG getting hold of a few extra 150s about 9 years ago.

 

[northwichcat]

You obviously don't understand the situation in Wales. Passenger numbers are rising year on year and overall the number of passengers in Wales has increased from 18 million in 2006 to 30 million now and are expected to continue rising. This despite the current 'no growth' franchise that has stopped any action being taken to tackle the chronic overcrowding on many routes in Wales, apart from the WAG getting hold of a few extra 150s about 9 years ago.

While 'no growth' is a valid point, it's also worth remembering the Virgin Trains enhancements in 2008 added capacity to one route and freed up a unit for ATW as after the changes they were only required to operate 1tph between Chester and Crewe rather than 2tph.

 

[Gareth Marston]

While 'no growth' is a valid point, it's also worth remembering the Virgin Trains enhancements in 2008 added capacity to one route and freed up a unit for ATW as after the changes they were only required to operate 1tph between Chester and Crewe rather than 2tph.

whilst there has been the odd unit here and there like this , the 2 extra 158's in 2006, the North Wales loco hauled set etc the reality is theirs been a 5% increase in carriages at the same time as passenger numbers have gone up 80% on average and in some places doubled.

 

[northwichcat]

whilst there has been the odd unit here and there like this , the 2 extra 158's in 2006, the North Wales loco hauled set etc the reality is theirs been a 5% increase in carriages at the same time as passenger numbers have gone up 80% on average and in some places doubled.

While I don't know what loadings were like on many of the routes in the old Wales & Borders franchise, I do know if the former First North Western area (which included North Wales) many trains had ample spare capacity prior to the ATW franchise starting. The frequent industrial action, cancellations and delays had put many people off travelling by train. So an 80% increase in demand wouldn't need a 80% increase in capacity even if 5% is well short of what is needed. Some of the former FNW routes did actually see an increase in capacity when the franchise map was redrawn (despite at the time not needing it) due to the fleet reorganisation e.g. 150s replacing 142s in North Wales and the entire 175 fleet eventually being made available to the new Welsh franchise.

 

[Gareth Marston]

As growth was not anticipated the prospect of extra revenue was no properly thought out. Theirs a basic mechanism to share any overall profit beyond a certain level in the franchise as a whole and with passenger numbers up 80% on average combined with 14 years of fare increases theirs easily double the passenger revenue knocking about than there was in 2003.

We have to remember that this is increased revenue is from the valleys, Swansea to Carmarthen etc and not just the Marches. As LNW GWR Joint says its almost impossible to untangle. The key is the £67 million is not profit from the English Marches.

 

[northwichcat]

As growth was not anticipated the prospect of extra revenue was no properly thought out. Theirs a basic mechanism to share any overall profit beyond a certain level in the franchise as a whole and with passenger numbers up 80% on average combined with 14 years of fare increases theirs easily double the passenger revenue knocking about than there was in 2003.

We have to remember that this is increased revenue is from the valleys, Swansea to Carmarthen etc and not just the Marches. As LNW GWR Joint says its almost impossible to untangle. The key is the £67 million is not profit from the English Marches.

Swansea to Carmarthen does benefit from the larger and more comfortable 175s though, which it didn't when they were First North Western units or even in the early days of the ATW franchise when the 175s were officially ATW units but some were being loaned out to operate North West routes until replacement units were sourced.

I agree revenue share is a problem.

 

[Gareth Marston]

While I don't know what loadings were like on many of the routes in the old Wales & Borders franchise, I do know if the former First North Western area (which included North Wales) many trains had ample spare capacity prior to the ATW franchise starting. The frequent industrial action, cancellations and delays had put many people off travelling by train. So an 80% increase in demand wouldn't need a 80% increase in capacity even if 5% is well short of what is needed. Some of the former FNW routes did actually see an increase in capacity when the franchise map was redrawn (despite at the time not needing it) due to the fleet reorganisation e.g. 150s replacing 142s in North Wales and the entire 175 fleet eventually being made available to the new Welsh franchise.

In Mid Wales we had capacity cut when Wales and Borders took over from Central Trains in Sep 01 and again in Dec 03 when ATW took over, we then had an increase in 06 and again in 08 when they went to BHM INTL and again in May 15 when we got he extra trains HOWEVER looking at my notes from Summer 01 I would say the Cambrian Mainline has a few more seats per day now than then but the coast is still behind.

 

[Gareth Marston]

Swansea to Carmarthen does benefit from the larger and more comfortable 175s though, which it didn't when they were First North Western units or even in the early days of the ATW franchise when the 175s were officially ATW units but some were being loaned out to operate North West routes until replacement units were sourced.

I agree revenue share is a problem.

Whilst the Standard Pattern Timetable recast in Dec 05 and transfer of all the 175's to the franchise did produce some marginal improvements for some we've had 12 years of little or no improvement for most folk certainly in terms of peak seats.

Whilst ATW have gained a place of pie between Piccadily and Manchester Airport and New St and International theirs still been extras within Wales- and far do you take in calculating a Euston to Aberystwyth fare might have so many % in England allocated to it but it would never have been bought if the Cambrian wasn't there in the first place.

Of course Daft and WG can come to some sort of horse trade and split the £67 million as a compromises...

 

[158756]

You obviously don't understand the situation in Wales. Passenger numbers are rising year on year and overall the number of passengers in Wales has increased from 18 million in 2006 to 30 million now and are expected to continue rising. This despite the current 'no growth' franchise that has stopped any action being taken to tackle the chronic overcrowding on many routes in Wales, apart from the WAG getting hold of a few extra 150s about 9 years ago.

I know passenger numbers have increased in Wales. But whilst a full 2 coach 175 requires less subsidy than it did when it was half full, I don't believe it makes massive profits. Remember that Northern is subsidised to the tune of 50p per passenger mile, or that TPE, perhaps slightly more comparable to the Wales and Borders regional services, also requires a huge subsidy. Both have also seen large increases in passengers since the early noughties.

 

[northwichcat]

TPE doesn't require a subsidy on the same level as Scotrail, old Northern or ATW. The old TPE franchise was on a similar subsidy level to LM and if First's plan for the new franchise works they'll be no subsidies by 2020. The new Northern franchise gets a much lower subsidy than the old one. I think the 50p rate quoted was per km after the Network Rail grant was applied not per mile.

 

[LNW-GW Joint]

It is ridiculous that a TOC in receipt of a subsidy should then pay a premium as well.

I'd be very surprised if the border services (2/3 coach DMUs running through lots of sparsely populated countryside not particularly quickly and not serving London) were profitable by any measure, and certainly not to the tune of £67m per year.

What would make sense would be if the franchise agreement envisaged fewer passengers and so a payment of £170m but the franchise 'only' loses £110m now. (Though of course the true costs are far higher)

Quite a number of franchises have "balancing payments" as a result of the contract, including VXC.
The W&B franchise will have an agreed subsidy to ATW for its 15-year life, but moderated by a revenue-sharing deal which will be triggered by increased revenue above target.
This results from ATW's performance in beating its revenue targets.
So DfT/WG pocket a share of increased revenue over the term of the franchise.

One of the issues at franchise renewal is that nobody will want to see a drop in premiums/rise in subsidy, but it is inevitable if services are to be increased.

 

[Gareth Marston]

Quite a number of franchises have "balancing payments" as a result of the contract, including VXC.
The W&B franchise will have an agreed subsidy to ATW for its 15-year life, but moderated by a revenue-sharing deal which will be triggered by increased revenue above target.
This results from ATW's performance in beating its revenue targets.
So DfT/WG pocket a share of increased revenue over the term of the franchise.

One of the issues at franchise renewal is that nobody will want to see a drop in premiums/rise in subsidy, but it is inevitable if services are to be increased.

The whole £67 million thing does seem to be hangover from the idiotic notion of a "no growth" franchise in a world where rail usage was growing. A view endorsed by the Labour Blair Government at the time and meekly accepted by the (Labour) Welsh Government. A real world franchise agreement in 2003 would have seen a declining subsidy profile and this whole thing would not be an issue now.

I think the Welsh Government is taking the mick somewhat expecting it to be given to them in full however you are never going to reduce the balance of subsidy/fares paid on regional lines unless your prepared to invest in them- a concept that the current Westminster Government doesn't seem to understand (A magic fairy called privatization certainly hasn't).

 

[northwichcat]

I know passenger numbers have increased in Wales. But whilst a full 2 coach 175 requires less subsidy than it did when it was half full, I don't believe it makes massive profits. Remember that Northern is subsidised to the tune of 50p per passenger mile, or that TPE, perhaps slightly more comparable to the Wales and Borders regional services, also requires a huge subsidy. Both have also seen large increases in passengers since the early noughties.

Just to add to my previous post I can't find figure for ATW's Network Rail grant but using ORR figures for subsidy per passenger km paid directly from DfT to the franchise operator/concession:

Scotrail 17.47p
ATW 13.07p
Merseyrail 12.69p
Northern 7.79p
TPE 3.70p
London Overground 3.56p
London Midland 2.80p
Southeastern 2.30p

Other franchises are either less than 2p or non-subsided.

 

[Gareth Marston]

Just to add to my previous post I can't find figure for ATW's Network Rail grant but using ORR figures for subsidy per passenger km paid directly from DfT to the franchise operator/concession:

Scotrail 17.47p
ATW 13.07p
Merseyrail 12.69p
Northern 7.79p
TPE 3.70p
London Overground 3.56p
London Midland 2.80p
Southeastern 2.30p

Other franchises are either less than 2p or non-subsided.

That's Gross not net then? ATW's net will be less than Northern's Gross once the balancing payment is taken into account.

 

[northwichcat]

That's Gross not net then? ATW's net will be less than Northern's Gross once the balancing payment is taken into account.

No the figures will include any revenue share (where the subsidy is refunded by the TOC due to revenue being higher than expected) or revenue support (where the TOC gets a subsidy/extra subsidy due to revenue being lower than expected.) For some reason I couldn't find ORR figures as up-to-date as the DfT ones and the DfT ones don't include ATW, Scotrail, Merseyrail and LO. The old Northern franchise was also on revenue share most years, in fact many years it was the only franchise on revenue share. However, the figures quoted won't include any subsides paid directly by PTEs, TfL or the Welsh/Scottish governments.

 

[Severn40]

No the figures will include any revenue share (where the subsidy is refunded by the TOC due to revenue being higher than expected) or revenue support (where the TOC gets a subsidy/extra subsidy due to revenue being lower than expected.) For some reason I couldn't find ORR figures as up-to-date as the DfT ones and the DfT ones don't include ATW, Scotrail, Merseyrail and LO. The old Northern franchise was also on revenue share most years, in fact many years it was the only franchise on revenue share. However, the figures quoted won't include any subsides paid directly by PTEs, TfL or the Welsh/Scottish governments.

But isn't the challenge that many people including politicians read TOC subsidies and payments as a way of measuring the regional performance of the rail network? Apologies for my naivety, the Wales and Border franchise is a good example where the strongest commuter flows in Wales are between Newport and Cardiff Central and yet the majority of services are not provided by ATW - but instead GWR and XC? (And this is not taking into consideration the accounting practices of distributing costs?)