Exactly. There has clearly been a disconnect between the infrastructure the DfT said would be available and that which they authorised and paid Network Rail to deliver.
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Virgin Trains East Coast franchise to end 24 June 2018 and is temporarily re-nationalised
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Exactly. There has clearly been a disconnect between the infrastructure the DfT said would be available and that which they authorised and paid Network Rail to deliver.
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https://www.google.co.uk/amp/www.la...r-disabled-woman-loses-seat-20180225.amp.html
Another negative celebrity blight on Virgin. Appears to be West Coast this time a few days ago.
Another negative celebrity blight on Virgin. Appears to be West Coast this time a few days ago.
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Bletchleyite
Veteran Member
This quote gets my goat.
Indian Railways operate compulsory reservations for the higher classes to avoid any overcrowding (often booked up months in advance), and any tourist is going to be using such higher classes generally speaking. But I've travelled unreserved second class, and I have *never* seen that level of overcrowding on any UK train, not even the Tube. To give you an idea, take a rush hour Northern Line tube train arriving at Bank at 8:50am, then add half as many passengers again, then leave the doors open so there's the added risk of falling out if someone moves.
It sounds like the usual problem on crowded trains:
- Overcrowding meant no way the staff could get through
- Possibly disabled person was unwilling to ask for a seat or for people to move (fair enough if unable e.g. deaf/dumb but the article does not say that). Not all disabilities are obvious, and people can't assume - neither practically nor because doing so can cause offence.
- People were unwilling to move when asked (I find one thing about football fans is that while intimidating they tend to look after the less fortunate/more vulnerable e.g. kids and disabled people - so most likely if asked they would have given up any seat).
I do think there is an issue with how disabled assistance is done and a lack of personal handoff on all TOCs, though. That would stand a significant process improvement.
Other than that realistically the only solution to this is compulsory reservations, and I would question if the passenger would have been happy to be turned away entirely. Though I do think loadings information in the journey planner, updated dynamically based on reservation level and actual loadings on trains supporting it, would be a big gain, and realistically isn't far off. That way it's at least possible to avoid known over-busy trains if you don't like them and there is another option.
Indian Railways operate compulsory reservations for the higher classes to avoid any overcrowding (often booked up months in advance), and any tourist is going to be using such higher classes generally speaking. But I've travelled unreserved second class, and I have *never* seen that level of overcrowding on any UK train, not even the Tube. To give you an idea, take a rush hour Northern Line tube train arriving at Bank at 8:50am, then add half as many passengers again, then leave the doors open so there's the added risk of falling out if someone moves.
It sounds like the usual problem on crowded trains:
- Overcrowding meant no way the staff could get through
- Possibly disabled person was unwilling to ask for a seat or for people to move (fair enough if unable e.g. deaf/dumb but the article does not say that). Not all disabilities are obvious, and people can't assume - neither practically nor because doing so can cause offence.
- People were unwilling to move when asked (I find one thing about football fans is that while intimidating they tend to look after the less fortunate/more vulnerable e.g. kids and disabled people - so most likely if asked they would have given up any seat).
I do think there is an issue with how disabled assistance is done and a lack of personal handoff on all TOCs, though. That would stand a significant process improvement.
Other than that realistically the only solution to this is compulsory reservations, and I would question if the passenger would have been happy to be turned away entirely. Though I do think loadings information in the journey planner, updated dynamically based on reservation level and actual loadings on trains supporting it, would be a big gain, and realistically isn't far off. That way it's at least possible to avoid known over-busy trains if you don't like them and there is another option.
LNW-GW Joint
Veteran Member
These sessions rarely produce hard facts, the legalities mean people are very guarded.
I took from Martin Griffiths that DOR delivered VTEC a weaker revenue position than expected.
The numbers were not reset in the 9 months between the bid and franchise start, so VTEC were not in a good position when they started.
It also seems that VTEC passengers are downtrading, with more use of cheap advance fares rather than walk-on.
But it wasn't clear why this had afflicted VTEC and apparently not VTWC.
However it will explain why VTEC is not offering as many cheap advances.
I'd have liked to have heard more from David Horne, who clearly has all the facts, but we got bluster from Martin Griffiths mostly.
Mark Carne was emphatic about NR having delivered all it was supposed to, but I suspect that was not the same as VTEC expected (from the ITT).
NR/ORR has not committed some projects, as detailed by Roger Ford in his piece in March Modern Railways.
These include freight loops, 4-tracking, and the northern power supply upgrade (the southern upgrade has been completed, as Mark Carne said).
In the subsequent chat with Mark Carne, Peter Wilkinson and his boss, they seemed to want to put the boot in on Stagecoach, who weren't there to defend themselves.
It's also very easy for government departments to close ranks and blame contractors.
Bernadette Kelly (DfT permanent secretary) said franchise failure was a part of the franchising model, as part of the risk transfer equation.
I still don't think we know what happens when the money runs out, except the trains will keep running.
My guess is that costs become "minister liable" once Stagecoach and Virgin have reached their bond limits (£200m).
Nobody volunteered a date for this, and VTEC are evidently still working to turn things around.
It also seems there are actually no "keys" to hand back!
After all that, I couldn't be bothered to watch the GTR session.
At least he was able to highlight the crazy system of franchising the Government seem stuck to, and it was interesting to see them say they'd forgo their bonuses albeit with grins.
Yes he was very precise in his language I thought.
Everything that was committed "so far" has been delivered. Which rather avoided the looking at things which were expected to be delivered in the future (such as the Northern Power Supply Upgrade which is still not funded I believe). Now that's not necessarily Network Rail's fault. They can only deliver what the DfT will pay them to deliver. But it was very precise. It would have been interesting if one of the Committee members had picked up on that and asked about future commitments.
My feeling increasingly is that it isn't Network Rail that have botched the delivery of upgrades and caused VTEC issues instead it is the DfT made promises in the ITT and then failed to follow through on committing to them (Northern PSU being perhaps the most obvious example).
It's perhaps relevant to note that the Select Committee hearing yesterday was of the Public Accounts Select Committee, not the Transport Select Committee.
The Public Accounts Select Committee's terms of reference are different to the Transport Select Committee's. The latter is consulting at the moment on a specific East Coast inquiry, with a deadline of Monday 26th March 2018 for written submissions, but no date yet for a hearing:
http://www.parliament.uk/business/c...city-east-coast-rail-franchise-inquiry-17-19/
Whereas, the Public Accounts Select Committee Inquiry apparently starts from the wider implications, but seems to have called Virgin Trains East Coast and Govia Thameslink Railway as witnesses from the specific franchises which have headlined the recent concerns that have prompted the committee's interest:
http://www.parliament.uk/business/c...iries/parliament-2017/rail-franchising-17-19/
Despite the more general remit of the Public Accounts Select Committee Inquiry, I was personally disappointed that the committee members yesterday did not seem to have more than a superficial awareness of the operational reality of the East Coast, Great Northern, Thameslink or Southern Railway franchises/contracts during the time periods that the incumbents have been running them.
Gareth Snell, in pooh-poohing the claimed effects of the changing political and economic environment, and the forecasts for both in the future, wasted the opportunity to question incisively on why this might affect the East Coast so detrimentally (though perhaps not so much other franchises). The unique profile of the East Coast business; the importance of discretionary leisure travel, the relatively low proportion of season ticket holders etc., etc., wasn't referenced.
I thought Martin Griffiths performed better than I had expected him to. I thought that he was more candid that he might have been, although he perhaps wanted to 'put the boot in' to the systemic lack of visibility that the new owner has on operational performance in the nine month pre-takeover period. Having said that, it's not uncommon for any private company, taking over another one, to have a period between the completion of due diligence and actual transfer of ownership, so there's always a risk that things can go 'wrong,' but undetected, in the last weeks and months of ownership. Indeed, due diligence is not universally successful in uncovering everything in any subject business.
He too missed the opportunity to talk about specific aspects of the franchise's performance that could have backed up his assertions. Instead, he talked about 'passion for the business', which has a habit of being a touch disingenuous and is, in my experience, sometimes used successfully to deflect challenge.
David Horne, who I have never heard speak before, didn't seem to - or couldn't - add much to the debate. I appreciate that he may be a terribly nice chap, who wasn't part of the bid team, and I can't imagine that he felt terribly comfortable in the environment of the hearing, but I did not see anything that made me think that he was the kind of 'figure' that the workforce (and customers) of a business that's hard up against the wall would coalesce around. Lest there be any misunderstanding of my point, the business operating in the current environment is not a going concern. It is being supported, as evidenced in their accounts, by Stagecoach plc. That the lack of financial sustainability is in part due to the premium payments which continue to be made is largely irrelevant to the business. They accepted those terms, as Mr Griffiths acknowledged.
It is, however, extremely relevant to the Public Accounts Committee, in that they could be asking the question in this hearing as to whether any operator, including that of last resort, could possibly have made the promised premium payments even if revenue targets had been met. And, accordingly, was the DfT unable to realistically assess the bids that were presented?
It feels like there's still something missing here between Virgin Trains East coast on the one hand saying that they're only marginally missing their revenue targets, because they've been working so hard and they've been so successful in delivering their side of the bargain, and yet on the other hand saying that they're burning cash at an incredible rate - all because of external factors.
Back to Mr Horne, though, and he genuinely seemed to be suggesting that sprinkling Virgindust over everything should have been 100% successful in delivering the results that they claimed were possible to date. If the same suggestion is made at the Transport Select Committee, perhaps the members of that panel will be more engaged and will judge how successful Virgin Trains East Coast has really been at delivering what it claims to have done - maybe they will ask how the new website has affected sales; whether sausage rolls have driven increased revenue and margin in First Class; whether twittertattle has improved customer perceptions of the service etc. They may also ask whether the Virgin 'brand' could ever deliver what some think it is capable of.
Which may also be relevant, from Martin Griffiths point of view, in how he justifies to the shareholders of Stagecoach plc, that continuing with any management contract to 2020 would deliver value for them. The phrase 'saving face' was mentioned at least once in the hearing, in the context of why they may wish to continue to 2020. The key thing here is, surely, that it's not Stagecoach's 'face' on the operation; it's Virgin's. So why should Stagecoach shareholders potentially prop up the reputation of a minority stakeholder?
Finally, there was also mention of 'exit fees', which was certainly a misdescription of potential performance bonuses, which might be forthcoming should Virgin Trains East Coast (or indeed Stagecoach alone) carry on until 2020 and successfully deliver such things at the introduction of IET. Although there were perceptible intakes of breath at the suggestion, it's surely something that Stagecoach shareholders would expect. Nevertheless, in terms of the Public Accounts Committee, I would also expect them to be looking at the costs that the early termination of the franchise will incur on the DfT. This is distinct from the premium payments to date, which the DfT has been receiving in full, and is also separate from the future premium payments which no-one might ever have been capable of delivering (see above) and therefore probably should be disregarded as they're only a notional loss to the tax payer.
But how much will it cost the DfT to run another tender process, or to be bounced into an East Coast Partnership as a result of early termination (even if that's a good thing) and what value has Virgin (ie not Stagecoach) already had from 125mph billboards running up and down the country for two years? Not forgetting, too, the column inches that Virgin's had from having its name in vinyl down the side of new trains for which, I assume, they have not yet paid a penny of lease costs towards. If it's considered that these, in aggregate, would exceed any reasonable performance bonuses, then the Public Accounts Committee could judge bonuses unjustifiable.
Overall though, I thought yesterday's hearing a very damp squib.
The Public Accounts Select Committee's terms of reference are different to the Transport Select Committee's. The latter is consulting at the moment on a specific East Coast inquiry, with a deadline of Monday 26th March 2018 for written submissions, but no date yet for a hearing:
http://www.parliament.uk/business/c...city-east-coast-rail-franchise-inquiry-17-19/
Whereas, the Public Accounts Select Committee Inquiry apparently starts from the wider implications, but seems to have called Virgin Trains East Coast and Govia Thameslink Railway as witnesses from the specific franchises which have headlined the recent concerns that have prompted the committee's interest:
http://www.parliament.uk/business/c...iries/parliament-2017/rail-franchising-17-19/
Despite the more general remit of the Public Accounts Select Committee Inquiry, I was personally disappointed that the committee members yesterday did not seem to have more than a superficial awareness of the operational reality of the East Coast, Great Northern, Thameslink or Southern Railway franchises/contracts during the time periods that the incumbents have been running them.
Gareth Snell, in pooh-poohing the claimed effects of the changing political and economic environment, and the forecasts for both in the future, wasted the opportunity to question incisively on why this might affect the East Coast so detrimentally (though perhaps not so much other franchises). The unique profile of the East Coast business; the importance of discretionary leisure travel, the relatively low proportion of season ticket holders etc., etc., wasn't referenced.
I thought Martin Griffiths performed better than I had expected him to. I thought that he was more candid that he might have been, although he perhaps wanted to 'put the boot in' to the systemic lack of visibility that the new owner has on operational performance in the nine month pre-takeover period. Having said that, it's not uncommon for any private company, taking over another one, to have a period between the completion of due diligence and actual transfer of ownership, so there's always a risk that things can go 'wrong,' but undetected, in the last weeks and months of ownership. Indeed, due diligence is not universally successful in uncovering everything in any subject business.
He too missed the opportunity to talk about specific aspects of the franchise's performance that could have backed up his assertions. Instead, he talked about 'passion for the business', which has a habit of being a touch disingenuous and is, in my experience, sometimes used successfully to deflect challenge.
David Horne, who I have never heard speak before, didn't seem to - or couldn't - add much to the debate. I appreciate that he may be a terribly nice chap, who wasn't part of the bid team, and I can't imagine that he felt terribly comfortable in the environment of the hearing, but I did not see anything that made me think that he was the kind of 'figure' that the workforce (and customers) of a business that's hard up against the wall would coalesce around. Lest there be any misunderstanding of my point, the business operating in the current environment is not a going concern. It is being supported, as evidenced in their accounts, by Stagecoach plc. That the lack of financial sustainability is in part due to the premium payments which continue to be made is largely irrelevant to the business. They accepted those terms, as Mr Griffiths acknowledged.
It is, however, extremely relevant to the Public Accounts Committee, in that they could be asking the question in this hearing as to whether any operator, including that of last resort, could possibly have made the promised premium payments even if revenue targets had been met. And, accordingly, was the DfT unable to realistically assess the bids that were presented?
It feels like there's still something missing here between Virgin Trains East coast on the one hand saying that they're only marginally missing their revenue targets, because they've been working so hard and they've been so successful in delivering their side of the bargain, and yet on the other hand saying that they're burning cash at an incredible rate - all because of external factors.
Back to Mr Horne, though, and he genuinely seemed to be suggesting that sprinkling Virgindust over everything should have been 100% successful in delivering the results that they claimed were possible to date. If the same suggestion is made at the Transport Select Committee, perhaps the members of that panel will be more engaged and will judge how successful Virgin Trains East Coast has really been at delivering what it claims to have done - maybe they will ask how the new website has affected sales; whether sausage rolls have driven increased revenue and margin in First Class; whether twittertattle has improved customer perceptions of the service etc. They may also ask whether the Virgin 'brand' could ever deliver what some think it is capable of.
Which may also be relevant, from Martin Griffiths point of view, in how he justifies to the shareholders of Stagecoach plc, that continuing with any management contract to 2020 would deliver value for them. The phrase 'saving face' was mentioned at least once in the hearing, in the context of why they may wish to continue to 2020. The key thing here is, surely, that it's not Stagecoach's 'face' on the operation; it's Virgin's. So why should Stagecoach shareholders potentially prop up the reputation of a minority stakeholder?
Finally, there was also mention of 'exit fees', which was certainly a misdescription of potential performance bonuses, which might be forthcoming should Virgin Trains East Coast (or indeed Stagecoach alone) carry on until 2020 and successfully deliver such things at the introduction of IET. Although there were perceptible intakes of breath at the suggestion, it's surely something that Stagecoach shareholders would expect. Nevertheless, in terms of the Public Accounts Committee, I would also expect them to be looking at the costs that the early termination of the franchise will incur on the DfT. This is distinct from the premium payments to date, which the DfT has been receiving in full, and is also separate from the future premium payments which no-one might ever have been capable of delivering (see above) and therefore probably should be disregarded as they're only a notional loss to the tax payer.
But how much will it cost the DfT to run another tender process, or to be bounced into an East Coast Partnership as a result of early termination (even if that's a good thing) and what value has Virgin (ie not Stagecoach) already had from 125mph billboards running up and down the country for two years? Not forgetting, too, the column inches that Virgin's had from having its name in vinyl down the side of new trains for which, I assume, they have not yet paid a penny of lease costs towards. If it's considered that these, in aggregate, would exceed any reasonable performance bonuses, then the Public Accounts Committee could judge bonuses unjustifiable.
Overall though, I thought yesterday's hearing a very damp squib.
LNW-GW Joint
Veteran Member
The PAC is only really interested in the impact on public finances, and any possible mis-spending of public money or poor HMG contract management.
They are not really interested in the mechanics of rail franchising, or the antics of private sector bosses.
In the case of VTEC, HMG is not (yet) out of pocket, and the hit has been on the shareholders.
The TSC is much more interested in the details of franchise delivery and performance, although on past evidence they do not get very close to finding the answers.
It can descend into local lobbying for my line against yours, and they easily get sidetracked.
But under a new chair (Lilian Greenwood), who does know what she is doing, we might get some clarity.
But by April or whenever the hearing is, events may have moved on.
They are not really interested in the mechanics of rail franchising, or the antics of private sector bosses.
In the case of VTEC, HMG is not (yet) out of pocket, and the hit has been on the shareholders.
The TSC is much more interested in the details of franchise delivery and performance, although on past evidence they do not get very close to finding the answers.
It can descend into local lobbying for my line against yours, and they easily get sidetracked.
But under a new chair (Lilian Greenwood), who does know what she is doing, we might get some clarity.
But by April or whenever the hearing is, events may have moved on.
My impression from yesterday was that the business is (and always has been) a going concern. But that it is unable to meet the premium payments because it isn't making as much money as expected. The operation is turning a profit (£200m was the sum mentioned by Mr Griffiths I think) but that is not enough to meet the premium payments.
TT-ONR-NRN
Veteran Member
Do we have any info as to if VTEC will still be operating in late June?
AlexNL
Established Member
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I don't think that Grayling and his civil servants have worked out the best option yet?
ForTheLoveOf
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Chris Grayling's announcement in Parliament at the beginning of the month was that the current modus operandi couldn't go on for any more than a 'matter of months'. Presumably this is when Stagecoach will stop propping up the business and will let it 'fail'.
Some form of operation will undoubtedly continue on the ECML, but whether it's under VTEC's brand or the current Stagecoach-Virgin consortium, or a DOR deal, is yet to be decided. Martin Griffiths of Stagecoach implied at yesterday's hearing that VTEC had not yet heard any concrete proposals from the DfT about the proposed 'not-for-profit' contract to 2020, nor specifically about the amount of any performance bonus ("exit fee", a misnomer if I ever saw one).
A 'going concern' means that a business is considered to be generating enough income to maintain solvency for the foreseeable future, or has or has access to sufficient capital reserves or facilities to be able to sustain any losses in the foreseeable future:
http://www.accaglobal.com/uk/en/stu...rces/f8/technical-articles/going-concern.html
Fundamentally, Virgin Trains East Coast is earning less money than it's costing to run the business. Part of those costs is the premium that it's continuing to pay in full to the DfT. In isolation, it's only relevant to look at the business and say that it's profitable at an operating level if it were not having to pay the premium, if it's also judged that it would be profitable if it did not have to pay wages, or for fuel, or insurance, or any other costs that it's otherwise subject to.
The suggestion that, somehow, the premium is an avoidable cost, and one which if it was reduced or removed, is not relevant in the context of their being a contract, and Mr Griffiths seems (now) to be quite clear about that. That's possibly a shifted position from pre-Christmas, when the suggestion was that the premium could or might be reduced through renegotiation.
So, and this was my reason for making the specific point originally, the current operation of the East Coast franchise is not profitable (because profit is what's calculated at the end, not part way through before all costs are applied), and the business is not in itself a going concern, but can be reported to be for accounting purposes because it's being financially supported by Stagecoach.
It's accepted in their accounts that Virgin Trains East Coast is [only] considered to be a going concern because of the capital support of Stagecoach, which means that it may meet the accounting industry's definition (although twelve months may be ambitious) but since publication of those accounts, and from a purely financial point of view, Virgin Trains East Coast has already let it be known, and it has been effectively corroborated by the Secretary of State in the House of Commons, that Stagecoach's support will be withdrawn in 'a matter of months'. This development means, I would maintain, that the business is no longer a going concern by any measure, and that's why a plan is being formed to deal with the future of the operation - just as a plan for the administration, bankruptcy, liquidation or sale of any other business might be being planned if it had been accepted that it was no longer a going concern.
As an aside, this is not to suggest that any business that's profitable is a going concern, nor that any business that's loss-making is not a going concern. Uber is a high-profile example of the latter, for instance.
Thank you that's very interesting.
I did think that was what you were driving at but just wanted to be clear that I understood. I'm somewhat worried that some people have the idea that the ICEC franchise is inherently financially unsound when in reality is only financially unsound because of the contractual payments that the current franchisee has signed up for. If the payments were only say £50m per year then we wouldn't be having this conversation as the business is making more than enough to cover that (but we probably would be talking about what a terrible deal it was for the taxpayer! Look at all the money they're making!
)
I did think that was what you were driving at but just wanted to be clear that I understood. I'm somewhat worried that some people have the idea that the ICEC franchise is inherently financially unsound when in reality is only financially unsound because of the contractual payments that the current franchisee has signed up for. If the payments were only say £50m per year then we wouldn't be having this conversation as the business is making more than enough to cover that (but we probably would be talking about what a terrible deal it was for the taxpayer! Look at all the money they're making!
)Bletchleyite
Veteran Member
A loss-making business is absolutely fine provided there is someone who is providing finance for it and happy to continue doing so. I'd imagine that, for example, there are probably quite a few pubs out there that don't make a lot of money or even make a loss but the landlord keeps them going because they enjoy it and the loss is not too bad to cover from their savings as a retirement activity. The key is being solvent - able to service your debts.
LNW-GW Joint
Veteran Member
The trouble for the rail industry is that if VTEC is not delivering the premiums, other franchises or railway spend will take a hit.
Halving (say) the premiums may solve the immediate EC problem, but where will the axe fall elsewhere?
It would be the same with public sector operation.
Halving (say) the premiums may solve the immediate EC problem, but where will the axe fall elsewhere?
It would be the same with public sector operation.
Many recently started franchises are due to move to either net or gross contributor to DfT soon so the problem is possibly mostly a cash flow one for DfT.
The trouble would ultimately be for The Treasury, and could just as likely impact defence spending as road building as international development. Arguably, the contracts governing rail franchises and even Control Periods for Network Rail mean that the rail industry would be less at risk from reduced government income than others might be.
And the 'problem' is only limited to Virgin Trains East Coast's lack of profitability if the goal is to maintain the franchising system at, potentially, any cost. If there are empty seats on their trains, and customers are dissatisfied or actually unable to go about their otherwise non-discretionary business on board them, then there remains the wider question of why it's considered that the railway network is an important part of the nation's infrastructure, and that the services operated thereon have an economic and social value.
Renegotiating contracts simply and solely to guarantee that a private company finds its involvement profitable and attractive is therefore likely to be relevant only if there is an unwavering commitment to maintaining its involvement.
Whilst there may once have been a time when some believed that only the private sector could add value and drive efficiency within the sector, there's a very real risk that we're now faced with a period where some believe that it's politically much more important not to question that, than it is to actually facilitate the delivery of greater value and benefit.
That the means to do so may already have been partly or fully proven, but that those means do not fit with political positions, may make objective assessments difficult at government level.
And as long as the opposition is similarly keen to lasso itself to another dogma/binary political position, it's perhaps even less likely that rational discussion will be encouraged.
Does it even make sense in the first place that the bidders have to specify the premiums in their bids and it essentially becomes a bidding war?
If someone were to go to an estate agents to rent a house, the house would be x amount of pounds per month or year. It wouldn't be so much for Mr Bloggs the cleaner or if it's Mr Big the global businessman the price of the same house in the window is then doubled.
Why don't the DFT just set the premiums beforehand, at an affordable level? A level based upon previous achievable revenue figures from the East Coast franchise. And the bids then become only about the level of improvements the TOC is proposing and not the premiums they say they can make?
In a way I am surprised Stagecoach Virgin appear not to be willing to prop up the operation until 2020. It would save their face and reputation publicly, and protect the integrity of the franchising system for the government TO SOME DEGREE. More of a damage limitation. They still keep their names on the trains and the average leisure traveller going from York to Edinburgh on a Saturday afternoon wouldn't have any clue the company was losing money. They could honour their commitments, as a matter of principle and to uphold their business image, providing they can stay afloat which presumably by the size of Stagecoach they could. And they could honour their commitments to the public and the taxpayer.
Finally, it seems from the info above from other posters that the government will not be willing to reduce the premiums. However, if DOR have to be appointed surely there will not be these huge premiums due to the government from them so the treasury may not be any better off. So perhaps the DFT should consider just lowering the premiums until finish in 2020, if simply doing that alone would bring everything back into the black and the whole thing would be resolved? Or lower the premiums to a level in which the operation could simply cover it's costs until 2020.
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ModernRailways
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Stagecoach don't actually have all that much money when you think of the size of their operation. Now they could be fiddling it of course so we don't truly see how much they have but by what is public they don't have huge amounts.
If they were to prop up the ECML to prevent it going back to DOR, or to another TOC, then they will put as little investment in as possible and those Saturday travellers will definitely notice when the service has remained the same for the last 4-6 years. If you look at the ECML it has had significant improvements over the past 9 years, and even NXEC brought in a plenty of improvements. The line is constantly needing to evolve and try new things, and (imo) if VTEC were to continue to just prop it up to save face then we'd see very few improvements made in the next 2+ years till a new TOC (or even Govt. potentially) comes in.
DOR would be a last resort, and whilst they won't bring in huge premiums like VTEC are saying (and failing) to do, they will still bring in plenty of money.
A company shouldn't be able to get away with overpromising, not only is it unfair on the other companies that have bid and were maybe more sensible with their bids, but it also throws the Govt. into a tizzy with them trying to save face and reassure that the franchise system is good and does work. I wish we'd stop playing politics with the railway (same for the NHS too).
I can see that asking for a set (probably minimum, but I'll come to that later) premium could work well. However if the DFT set it too low then the TOC's would be laughing ask the way to the bank.
Personally I think that there should be a way of setting a minimum fixef premium for each year with then a profit sharing basis there after. TOC's could then haggle over how that is spread over the franchise, with those who provide a good even split compared to all the premiums towards the end getting rewarded with "extra points" when evaluating the bids.
However, there would also be points available if the TOC's provide investments which could see the likely income (and therefore payments to the DFT) goes up. N doing so the TOC would need to cost improvements and judge their likely income. This could allow TOC's to say we'll spend X on something that means that there's less late payments (i.e. a new loop or better equipment) or Y on something that will mean more passengers come to the network (i.e. new/extra trains or new services/stations). The DFT could also ask for similar things (so if there was a good idea on a loosing bid last time it could be specified next time).
In doing so you could see more franchises like Chiltern.
Even those franchises that are supported by the government could do a similar thing, just with a maximum level of support. With greater rewards on the income if their proposed investments work out (say a normal 70:30 split, on the favour of the government, but once 90% of the extra support the government gave having been paid back the split moves to 50:50 until 120% of investment and then anything after that is split 30:70 in favour of the TOC).
In doing so anything with a good level of return >2:1 (i.e. for each £1 spent £2 or more is generated) would be easy wins for TOC's to suggest as it would probably be worth doing.
You could also see the DFT providing (say) 25% of the extra money generated to be used by the next franchise holder to then use for the investment on that next franchise with the rest being used to fund the general railways spend.
It would mean that on those no growth franchises that we've had in the past which then saw large growth would then have a pot of money to spend on the new franchise, or even if agreed by the DFT there could be spending mid franchise (say a tag on order for new trains to another TOC's train order).
It would, if all the franchises do return more than the basic level then the level of government support from general taxation could be reduced (or even there could be none). If the TOC's got really good at it then there could be quite a sizable level of money that had to be spent on the railways with little or no extra general taxation required except for some new projects/reopenings.
ForTheLoveOf
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I'm afraid that's probably wishful thinking. True, there's still significant room for growth on some franchises but most of them are at or beyond capacity and so any 'growth' or reduced subsidy could only come from increasing fares, whilst also thereby reducing ridership. And about the 'small thing' of projects, if RDG's figures are to be believed, around a quarter of all railway revenue (i.e. tickets) goes towards upgrades and projects.
Just take the £10bn GWML electrification project - it's not built an inch of new line (well, not to any new destinations, maybe a few depots etc.). But it's cost how many millions per mile... These things are unbelievably expensive.
jyte
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Unless £10bn includes the new trains then I think that number is off.....
ForTheLoveOf
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Include new trains it may - but either way, no high-speed track has been built and yet a fortune has been spent.
I did quantify that last bit that you quoted by saying if they got very good.
I would question how at capacity the services are when, as an example:
- XC are running 4 coach trains
- Northern, GWR, etc. have a number of services that are less than 4 coaches long, with a few that are only one coach long.
- SWR doesn't have all their trains being 10/12 coaches (depending on if they are 23/20m long)
I'm sure others can think of other examples, however these are mostly things that could be fixed with more units, longer platforms, changes to track layout, etc. In short the very things that TOC's could invest money in to generate extra income.
Not every line is used to it's maximum capacity, and sigh there's probably a lot that wouldn't justify the extra spend to do so there's got to be some which could see an increase in service frequencies with little more than just extra units to run the services which would generate enough passengers to justify it.
Yes, to be totally free of taxation investment, would likely be wishful thinking. However, I would suggest that it's more likely under the above suggested model that what we currently have as a franchise model.
I would also suggest that given that income falls short of expenditure by about 20% of the total (or less than £4 billion out of over £18 billion, which when compared with the total government spend of £772 billion is less than 0.5% of government spend) then we're probably in a place where with fixing some of the problems we could get to a point where the account of taxation investment in the railways could be seen as a rounding error (say less than 0.25% or even lower) within a few times of each franchise renewal.
SaveECRewards
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I was forwarded anonymously an email David Horne sent to VTEC staff, I've reproduced it here: https://saveecrewards.co.uk/blog/email-vtec-staff
As I expected it seems like VTEC are fairly confident of continuing but there's going to be people from the consortium of advisors for the operator of last resort are going to be going around and asking questions.
As I expected it seems like VTEC are fairly confident of continuing but there's going to be people from the consortium of advisors for the operator of last resort are going to be going around and asking questions.
I'd suggest you check the title of the thread...
Wasn't he the lead in the bid team?
It's usual for the "bid director" (or whatever they call them these days) to become the line director.
Also - you should consider being a little more concise in your thoughts.
A very long post...
I could be wrong but I don’t think he was for VTEC, I’m sure he was still MD of EMT until about three months before VTEC took over from EC.
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