State poised to take over more train operators?

[Nicholas Lewis]

DT running an article tomorrow which says

A wave of train operators are being targeted for nationalisation – stoking fresh fears about the dominance of the state across the country’s strike-ridden train network.

Government officials are now being accused of “delusions of grandeur” and “empire building” by train bosses that claim the state is throttling private sector involvement in the railways.

I suspect its a contrived article to warn off the DfT from thinking about transferring anymore operators to OLR.

 

[Bletchleyite]

Does the Torygraph have any influence on the Government now? I think they've gone way too far right to be that now. In particular they keep shouting for HS2 to be canned, when it seems clear it is now pretty safe - the chance was there to can it as part of the "austerity 2.0" initial announcement, and it was (fortunately) not taken.

 

[12LDA28C]

Sounds like complete nonsense to me. Last I heard the OLR were already stretched to the limit with the services they run and couldn't cope with any more.

 

[Facing Back]

I've just read the article and there doesn't seem to be anything especially new in it.

The TOCs would have preferred a bail-out which gave them more opportunity to earn a slightly higher margin I'm sure but I didn't hear them - or their owners - scream when saved from default.

I'd be surprised if the DfT didn't want to send a message that they can and will take over defaulting TOCs, even if they can't, won't and wouldn't add much value if they did anyway under the present terms.

Politically and organisationally it seem's we are in a holding pattern until GBR or whatever structure replaces it comes online whilst going through a period of tremendous industrial unrest. I'd expect all sides, and much more likely. all commentators to be very vocal at the moment.

 

[popeter45]

with GBR sounding dead in the water long term OLR is prob the only option left as i doubt many companies want to run a new franchise any more

 

[Facing Back]

with GBR sounding dead in the water long term OLR is prob the only option left as i doubt many companies want to run a new franchise any more

The mood music doesn't sound good for GBR so I am waiting to see whether it continues or is replaced or perhaps more likely reimagined.

I won't be desolate to see it changed. I don't want full nationalisation however the TOC structure seems to me to have proven itself to be less than optimal - even though I'm a fan in principle of private investment and competition.

OLR long term seems though to be the worst of both worlds. Either work out a proper way to work well with the private sector or get off the pot and nationalise it properly.

 

[Bletchleyite]

OLR long term seems though to be the worst of both worlds. Either work out a proper way to work well with the private sector or get off the pot and nationalise it properly.

Agreed. But either way it needs a level of commercial freedom, be that by TOC or as a nationalised business that's set a budget and direction and allowed to get on with it (i.e. basically a QuANGO* - they are not necessarily a bad thing!)

* Quasi-autonomous non-governmental organisation, if I recall. BR was basically one, as is Network Rail, or indeed an OLR TOC.

 

[Sorcerer]

* Quasi-autonomous non-governmental organisation, if I recall. BR was basically one, as is Network Rail, or indeed an OLR TOC.

Is that in any way similar to the Swiss and German models in which they are technically independent companies (AG/SA) which are regulated by public law and where the state are the single shareholders?

 

[gabrielhj07]

"Government accused by private sector rail bosses of ‘nationalisation by stealth’"

How long has it taken to realise this! Not that is necessarily a bad thing.

I was also interested by this:

The company also “maintain a state of readiness to assimilate responsibility for more train operators, as required, and to support the industry’s transition to Great British Railways and the associated industry reform.”

- which is contrary to my previous assumption that the OLR was maxed out, what with LNER, Northern, & Southeastern.

Of concern was this:

The Government said that the Operator of Last Resort’s ultimate aim was to return the train operators to the private sector.

Which would seem to be a waste of all that has been acheived under OLR management.

 

[Bletchleyite]

Is that in any way similar to the Swiss and German models in which they are technically independent companies (AG/SA) which are regulated by public law and where the state are the single shareholders?

That's one model for it. It's near enough how Network Rail is structured, isn't it?

 

[Facing Back]

Is that in any way similar to the Swiss and German models in which they are technically independent companies (AG/SA) which are regulated by public law and where the state are the single shareholders?

All companies are technically independent so yes in principle. It could a limited company by guarantee, where the government guarantees any debt of by share, where the government is the owner of the shares. I believe Network Rail is the former.

 

[CyrusWuff]

DT running an article tomorrow which says



I suspect its a contrived article to warn off the DfT from thinking about transferring anymore operators to OLR.

Possibly a slow news day, following Companies House publishing the Accounts for DfT OLR Holdings for the year to 31st March 2022 on 15th December, with the "spokesman for OLR" being quotes lifted directly from said Accounts.

 

[Sorcerer]

That's one model for it. It's near enough how Network Rail is structured, isn't it?

Officially Network Rail is an "arms-length" body of the Department for Transport and doesn't have shareholders unlike SBB which is an SA, a type of limited company. But I am not entirely sure how different the business practices are between the two and how different the two structures actually are.

All companies are technically independent so yes in principle. It could a limited company by guarantee, where the government guarantees any debt of by share, where the government is the owner of the shares. I believe Network Rail is the former.

Thanks for the info.

 

[Facing Back]

Officially Network Rail is an "arms-length" body of the Department for Transport and doesn't have shareholders unlike SBB which is an SA, a type of limited company. But I am not entirely sure how different the business practices are between the two and how different the two structures actually are.


Thanks for the info.

my typo. That should have been "or" by share. As Bletchelyite said. Network Rail is a public company limited by guarantee and has issued no shares. In operational practice the two are similar, in one, the guarantor(s) are the ones to appoint the directors, in the other it is the shareholders. In both cases it is "arms length" in that the directors have the authority to manage and run the company. The shareholders and guarantors are directly involved in "resolutions" which are strategic decisions normally including financing, share issues, acquisitions etc but otherwise not day to day at all.

Of course they can replace the directors if they don't like the way they are running the company - but that is still "arms length".

If the government stacked the board of directors with civil servants or ministers then that would be stretching it but I don't believe a minister can serve on a board - I need to check that - and typically there is only a very small number of civil servants (1) on the boards.

 

[LNW-GW Joint]

Of concern was this:
Which would seem to be a waste of all that has been acheived under OLR management.

OLR's day job is to manage failed TOCs to the point when they can be refranchised back to the private sector.
Otherwise it goes against the Railways Act.
Repeated direct awards to companies (without competition) is another way of avoiding the Act.
GBR is supposed to change all that.

 

[tbtc]

Probably just sabre rattling

Does anyone really want more OLR involvement after the disaster of the government controlled Northern (which has abandoned any ambition, abandoned services on many of the Yorkshire routes other than those which serve Leeds, introduced significantly more short notice cancellations than under Arriva… Best summed up with the decision to cancel passenger services on the Brigg line but to continue to run actual DMUs in the actual paths to maintain route knowledge for staff albeit without any of those inconvenient passengers allowed to get in the way!)

I think that the government might be in for a surprise when they see the number/ quality of bidders for whichever franchise is the first to be put to the market (rather than the various “extensions” being agreed with existing operators) - if the system is to work then it needs genuine competition at the bidding stage from a range of high quality companies

 

[nanstallon]

Usual British getting the worst of both worlds. There is more micro management these days than there was under nationalised British Rail. The Northern debacle shows what we can expect in the future.

 

[Verulamius]

To get rid of micro management, Network Rail and OLR would need to be removed from being treated as central government for ONS statistics purposes - this would stop DFT being financially responsible for them.

Of course this has knock on consequences, how does DFT ensure that the billions spent on rail is properly spent etc, but the Office for Rail and Road was originally set up for that purpose.

 

[LNW-GW Joint]

The original fiction for Network Rail to be in the private sector was that its main income came from private sources (the private TOCs).
But once DfT started funding NR directly (the "network grant"), and funding some TOCs directly (OLR), it came within the ONS public sector criteria.
There's no real prospect of undoing that move.
GBR (DfT+NR+some TOC strategic staff) will be firmly in the public sector.
How much will be left for private TOCs, and worth bidding for, is as yet unknown.
Labour would have it all in the public sector, one supposes (but not freight or open access or rolling stock)

 

[12LDA28C]

OLR's day job is to manage failed TOCs to the point when they can be refranchised back to the private sector.
Otherwise it goes against the Railways Act.
Repeated direct awards to companies (without competition) is another way of avoiding the Act.
GBR is supposed to change all that.

Who on earth would want to take on a rail franchise in the current climate? The franchise system as we know it is dead. Maybe it's time for a new Railways Act as the one passed in 1993 now seems as far removed from the reality of today's railway as it's possible to get.

GBR is looking increasingly unlikely to happen, at least in the form as originally proposed.

 

[Nicholas Lewis]

Who on earth would want to take on a rail franchise in the current climate? The franchise system as we know it is dead. Maybe it's time for a new Railways Act as the one passed in 1993 now seems as far removed from the reality of today's railway as it's possible to get.

Franchising as a solution was being trashed by politicians and commentators, wrongly in my view, even before covid finished it off. Yes some operators were failing badly but others were also delivering well. What didn't help was DfT adverse to almost being narcissistic against Stagecoach/Virgin going all out to eliminate them from the market with there replacements failing badly. The upside of a franchise is it gave an incentive to the operator to balance risk/reward over ridership revenue and also keeping staff onside was mission critical so I doubt we would have seen teh scale of industrial action we are now seeing. Anyhow franchising is discredited and the concession model looks an appropriate replacement but it needs an informed buyer and teh DfT is not that and im not sure that GBR would have been one either certainly in the short term. So the whole thing has now become a buggers muddle and I suspect teh industry will now drift along with the only outcome being an attrition on service levels to cut costs. Its going to take a general election to move things forward but even Labour have yet to detail how they are going to deliver something different and with the pressures on the NHS let alone education how much profile will it get.

 

[Bletchleyite]

Franchising as a solution was being trashed by politicians and commentators, wrongly in my view, even before covid finished it off. Yes some operators were failing badly but others were also delivering well. What didn't help was DfT adverse to almost being narcissistic against Stagecoach/Virgin going all out to eliminate them from the market with there replacements failing badly. The upside of a franchise is it gave an incentive to the operator to balance risk/reward over ridership revenue and also keeping staff onside was mission critical so I doubt we would have seen teh scale of industrial action we are now seeing. Anyhow franchising is discredited and the concession model looks an appropriate replacement but it needs an informed buyer and teh DfT is not that and im not sure that GBR would have been one either certainly in the short term. So the whole thing has now become a buggers muddle and I suspect teh industry will now drift along with the only outcome being an attrition on service levels to cut costs. Its going to take a general election to move things forward but even Labour have yet to detail how they are going to deliver something different and with the pressures on the NHS let alone education how much profile will it get.

I think one of the things where it went wrong was that it has mostly been "who can do X cheapest" and less so "we're going to spend X, what's the best you can do for us". I do get that the former is easier to analyse, but the latter is both better at cost control and at delivering quality. There's not only one franchising/tendering model out there.

 

[Annetts key]

I would argue that when it comes to public transport, the DFT has the Sadim touch…

 

[LNW-GW Joint]

Who on earth would want to take on a rail franchise in the current climate? The franchise system as we know it is dead. Maybe it's time for a new Railways Act as the one passed in 1993 now seems as far removed from the reality of today's railway as it's possible to get.
GBR is looking increasingly unlikely to happen, at least in the form as originally proposed.

Franchise is a loose term, but I mean a contract (NRC now, rather than a formal franchise) let by competition rather than being offered to the incumbent on a plate, as is happening now.
The whole point of the GBR delay was to get a revision of the Railways Act on the statute book so that it permitted the responsibilities desired by the DfT, with GBR issuing contracts rather than the DfT.
It also affected the statutory position of NR and the regulator ORR, and the whole issue of private versus public sector contracts.
Because they can't find parliamentary time for a new Railways Bill/Act, we have to bumble on as we are, which suits no one (except possibly the Labour party).
The strikes just prolong the agony because the changes can't be announced/implemented while the industry is in turmoil.

 

[JonathanH]

Does anyone really want more OLR involvement after the disaster of the government controlled Northern (which has abandoned any ambition, abandoned services on many of the Yorkshire routes other than those which serve Leeds, introduced significantly more short notice cancellations than under Arriva… Best summed up with the decision to cancel passenger services on the Brigg line but to continue to run actual DMUs in the actual paths to maintain route knowledge for staff albeit without any of those inconvenient passengers allowed to get in the way!)

I'd imagine most people don't think of Northern as a 'nationalised' operation and if asked would say that they want it to be transferred to public control, even though it already is.

 

[Annetts key]

I'd imagine most people don't think of Northern as a 'nationalised' operation and if asked would say that they want it to be transferred to public control, even though it already is.

There are still people around who refer to the mainland U.K. railways as BR…

And no, the vast majority of the public have no idea about the ownership of the different parts of the railways, and I don’t think most of them care.

Do you care who actually owns the aircraft that you board when you take a flight?
Do you care who owns the garage/forecourt where you filled up your vehicle with fuel?

How many people know that certain fast food chains are actually actual commercial franchises?

 

[fgwrich]

I'd imagine most people don't think of Northern as a 'nationalised' operation and if asked would say that they want it to be transferred to public control, even though it already is.

A lot of members of the public still see Northern / TFW (slightly different I know) and LNER as privatised businesses, while simply cannot fathom how tightly controlled the remaining TOCs are! Makes me laugh when you see comments regarding for example, a delayed LNER service due to something like a bridge bash, with the usual "should be bought back under government control"...

 

[Bletchleyite]

I think people get TfW not being privatised, if only because "Transport for X" has become an established name for state/local Government owned transport bodies. LNER and Northern I suspect they think are.

 

[Annetts key]

If only bridge bashing could be bought back under government control...

 

[tbtc]

I'd imagine most people don't think of Northern as a 'nationalised' operation and if asked would say that they want it to be transferred to public control, even though it already is.

Agreed!

I don’t think the people demanding “Nationalisation” (probably a majority of the population) realise just how much the railway has always been controlled the government and how much more responsibility has been taken by them since Covid started

Yet you’ll continue to see Corbyn-style politicians demand we “take back control” as if this will magic everything better

There are still people around who refer to the mainland U.K. railways as BR…

And no, the vast majority of the public have no idea about the ownership of the different parts of the railways, and I don’t think most of them care.

Do you care who actually owns the aircraft that you board when you take a flight?
Do you care who owns the garage/forecourt where you filled up your vehicle with fuel?

How many people know that certain fast food chains are actually actual commercial franchises?

Good point about ownership, I have no idea if my local supermarket is a building leased from another company or if the last double decker I was on was on was owned outright by the bus company or a Third Party

(But people have this weird obsession about private companies not being able to take any profit in the rail industry, as if that’s the biggest problem it currently faces!)