Speculation: what could replace the rail franchising system?

[Meerkat]

Even Labour governments have borrowing limits. If you nationalise the railways then it doesn’t matter how brilliant your business case is, if there is no spare borrowing you don’t get your project.
And whilst lawyers get derided the private companies lawyers make sure the government delivers what it promises and doesn’t get cut just because the Treasury is a bit tight this year.

 

[Mikey C]

London to Birmingham to me the only major route where genuine competition exists, due to the Marylebone to Snow Hill alternative built up by Chiltern since privatisation. As a result, off peak fares between London and Birmingham are ridiculously cheap, whether on Chiltern, VTWC or LNWR.

I can't think of any 2 city pairings in a similar situation, as either the same operator operates all the alternatives, or the alternative route is significantly worse or hasn't the capacity for expansion anyway.

 

[Class 170101]

Concessions mean the DfT decides everything. Is that really a good idea?
Why are railway companies pilloried for making money, they don’t even make much?!
Do the staff say “no no, I don’t need the pay rise - I have enough to live on and don’t want to make a profit out of the poor customers”

I think the issue here is those at the top giving themselves / getting huge payrises and those lower down getting less.

I just cannot understand those that DONT want to nationalise the railways.
For example, at Plymouth there are 2 operators, GWR and XC. That means a huge duplicity in drivers, TMs, on board staff, backroom staff, management etc . Now imagine if we were all run by one body, a decent number of staff could be done away with ( through natural wastage I hope! ) . Savings to the taxpayer would be enormous when this is replicated around the UK, the staff bill would be absolutely slashed. Not to mention other efficiencies in standardised liveries and rolling stock etc.
From a money point of view, nationalisation makes complete sense .

1. Granted, I'm not a railway expert, but I cannot see how merging companies would reduce the numbers of drivers and on-board staff you'd need. I'm pretty sure you'd need precisely one driver for each train that you run, no matter how many different companies run the trains. Maybe you'd need fewer managers, but I'd expect the savings you'd get from that would be an insignificantly small proportion of overall operating costs. And having just one company and so one (larger) team of managers would probably mean you lose some ability to innovate, to try new ideas.

I believe there would be some driver savings as certain trains would be covered by other depots more local to the area. East Coast services to Aberdeen / Inverness / Glasgow would eb covered by what are now Scotrail depots at those locations rather than lodging turns for Aberdeen / Inverness or ECS or Taxi moves in the case of Glasgow.

You could argue the same about EMR to Liverpool which is a relatively late start and eary finish just to get back to Nottingham where the depot is. I'd be surprised if these early and late turns did much more than one round trip between Nottingham and Liverpool.

It also means certain journeys that could be considered reasonable cannot be done because the nearest depot for the operator is not towards the end of the route. Again the last direct train Nottingham to Liverpool is 18:47 because of where the nearest train crew depot that is operated by said service provider is.

Ironically wage inflation is something that privatisation made worse, as TOCs and FOCs know all too well that bunging an existing driver at a different company an extra five grand is cheaper than training a new driver. Those TOCs which don't have top link work, like Northern, end up constantly having to train up replacements for departees.

Merging commuter and Intercity TOCs, as on GWR, certainly helps with that. But then, if you're not careful, you end up with an unwieldy behemoth like Central Trains.

Only agree with this to a point. You would think that driving trains between Shenfield and Liverpool Street all day (and in future to Reading) all stations would be as dull as ditchwater compared to the faster work on GA. but many went crossrail for the money rather than the 'more' intercity work.

 

[yorksrob]

In my experience, since the heyday of the franchised system about fifteen-twenty years ago, value for money seems to have been becoming increasingly difficult to find for the passenger. A combination of central Government's unrealistic drive to cut subsidy and yield management which sometimes seems designed to catch prospective passengers out.

LNER is a case in point. Under the bonnet, the franchise is still very much VTEC in terms of price. The number of times I've gone to look for tickets between W Yorks and London, and there's nothing less than £50. This simply wasn't the case fifteen years ago.

Whatever system the Government decides upon, passengers will be left increasingly out of pocket.

 

[JonathanH]

LNER is a case in point. Under the bonnet, the franchise is still very much VTEC in terms of price. The number of times I've gone to look for tickets between W Yorks and London, and there's nothing less than £50. This simply wasn't the case fifteen years ago.

Anyone who thinks fares would be cheaper under nationalisation is completely deluded.

 

[yorksrob]

Anyone who thinks fares would be cheaper under nationalisation is completely deluded.

I wasn't really making a point about privatisation or nationalisation. I think it was a peculiar circumstance of the late 1990's/early2000's in which the franchised system seemed to succeed in controlling fares, particularly on the InterCity routes. That boat has long since sailed.

 

[JonathanH]

I wasn't really making a point about privatisation or nationalisation. I think it was a peculiar circumstance of the late 1990's/early2000's in which the franchised system seemed to succeed in controlling fares, particularly on the InterCity routes. That boat has long since sailed.

Yes, the early days of Advance Singles replacing Apex / SuperAdvance was one associated with very cheap fares. As you say, those days are now gone - VTWC was the last vestige of them really (for travel against the main flow).

 

[yorksrob]

Yes, the early days of Advance Singles replacing Apex / SuperAdvance was one associated with very cheap fares. As you say, those days are now gone - VTWC was the last vestige of them really (for travel against the main flow).

Looking at the current set up, I find myself envying those areas that have access to LNWR services. They seem to be the only long distance company with a pricing model that involves competitively priced walk-up fares being available all the time. If the new system could replicate that over the rest of the network (particularly the ECML), rather than the TOC's always having the upper hand, I would support it.

 

[Meerkat]

Looking at the current set up, I find myself envying those areas that have access to LNWR services. They seem to be the only long distance company with a pricing model that involves competitively priced walk-up fares being available all the time. If the new system could replicate that over the rest of the network (particularly the ECML), rather than the TOC's always having the upper hand, I would support it.

So what you need is on rail competition....and certainly not nationalisation!

 

[yorksrob]

So what you need is on rail competition....and certainly not nationalisation!

It depends on what kind of competition.

On the ECML, we have a sort of competition between Grand Central and LNER, but they both offer the same fares model heavily based on AP fares and with GC pitching itself just below LNER.

What's needed I think is for some services, whether they be a different company or not, to be specified as having a similar pricing model to the LNWR one, which is based on low walk up fares. A sort of budget option.

 

[Tetchytyke]

Anyone who thinks fares would be cheaper under nationalisation is completely deluded.

Fares rose dramatically and markedly when East Coast were turned into Virgin. The price-gouging pretty much started overnight.

LNER isn't nationalised, and has the same management anyway, so that has continued.

As for value, it depends where you look. There's good value on advances York-Newcastle (especially compared to the eye-watering walk on fares) and same Leeds-York (I'm on the 1720 next week, just booked it, cost four quid).

For me, I simply believe that the 5% we hand over to the TOCs for doing bugger all is wasted money.

 

[AlastairFraser]

I think the problem with that argument is that the low rates that the Government pays depends on the lenders having confidence that the Government isn't borrowing too much, and on the money being available to lend. If the Government starts borrowing more to pay for nationalised railway investment, then, sure, it may secure lower rates than a private company would. But the fact of that additional Government borrowing will tend to slightly push up the rates the Government pays - not just for railway borrowing, but for all Government borrowing. So stuff that the Government is doing that has nothing to do with the railways will cost more because of the Government borrowing for the railways. That's not to say we shouldn't borrow to invest - clearly we should if the investment has a good case. But the case for borrowing being cheaper if done by the Government rather than privately isn't so clear cut.



You don't need to nationalise the railways for the Government to dis-incentivise other forms of transport. The Government could do that tomorrow if it was so inclined. The problem is that, under the Tories, the Government isn't inclined to do that.

Thank you for your considered and sensible response. In response to the first point, rates may go up for other borrowing but the plans of the party that most famously supports nationalisation do not involve a hell of a lot of borrowing at any one point because the nationalisation programme would be rolling and gradual. In response to your second point, I agree,but there may be significant public dissent like the gilets jaunes in France and the fuel protests in the early 2000's if there was not significant reform and extension of public transport services in this country to give people an alternative under any non-Tory government.

 

[Meerkat]

For me, I simply believe that the 5% we hand over to the TOCs for doing bugger all is wasted money

What 5% is this? And you would need to prove that a nationalised company would cost 5% less even if that were true. Haven’t regional governments in Germany made massive savings escaping from DB as sole supplier?

I agree,but there may be significant public dissent like the gilets jaunes in France and the fuel protests in the early 2000's if there was not significant reform and extension of public transport services in this country to give people an alternative under any non-Tory government.

Both of those protests were pro car. The fuel protests caused disruption because the hauliers were involved. I don’t see the relevance, there aren’t the numbers to cause pro public transport disruption and what would they disrupt?

 

[Carlisle]

You don't need to nationalise the railways for the Government to dis-incentivise other forms of transport. The Government could do that tomorrow if it was so inclined. The problem is that, under the Tories, the Government isn't inclined to do that.

We’ve already seen a fair number of disincentives to car use from less road construction/improvements, congestion charging ,ULEZ , a massive increase in ANPR camera use everywhere primarily to raise revenue, workplace parking tax proposals etc

 

[Tetchytyke]

And you would need to prove that a nationalised company would cost 5% less even if that were true.

The average profit margin is about 5%. Now unless you think profit is magic money that appears from nowhere, then the exact same service provided by a not-for-profit would be 5% cheaper.

Haven’t regional governments in Germany made massive savings escaping from DB as sole supplier?

Who knows, but if you're asserting that I'm sure you have evidence to support it.

 

[notlob.divad]

The average profit margin is about 5%. Now unless you think profit is magic money that appears from nowhere, then the exact same service provided by a not-for-profit would be 5% cheaper.

Or have 5% more for re-investment in improving the infrastructure and or rolling stock.

 

[Bletchleyite]

Or have 5% more for re-investment in improving the infrastructure and or rolling stock.

IF the non-profit can deliver the same efficiency as the for-profit business. This often proves not the case.

 

[hwl]

For me, I simply believe that the 5% we hand over to the TOCs for doing bugger all is wasted money.

The average profit margin is about 5%. Now unless you think profit is magic money that appears from nowhere, then the exact same service provided by a not-for-profit would be 5% cheaper.

Who knows, but if you're asserting that I'm sure you have evidence to support it.

The average TOC profit margin was 2.8% according to the latest ORR data, as I post last week in a thread when this came up. What is your source for the 5%? and have you also looked at all the costs in running East Coast both directly as OLR and the additional DfT costs?

 

[Tetchytyke]

Or have 5% more for re-investment in improving the infrastructure and or rolling stock.

The cost of investment in improvements is, of course, included before profits, as the rolling stock improvements are paid for through higher leasing charges.

IF the non-profit can deliver the same efficiency as the for-profit business. This often proves not the case.

I think this idea that non-profit companies are wasteful and spendthrift is, by and large, a complete fallacy.

I think this idea that private for-profit companies are lean and efficient is, by and large, a complete fallacy.

If you want to talk about bang for your buck, late-80s BR knocks spots off anything the TOCs have managed since.

 

[hwl]

IF the non-profit can deliver the same efficiency as the for-profit business. This often proves not the case.

A lot of the investment only happens because it isn't on the Government balance sheet...
The TOC & ROSCO arrangement allow a lot more investment than HM Treasury would normally allow.

 

[Tetchytyke]

have you also looked at all the costs in running East Coast both directly as OLR and the additional DfT costs?

Running East Coast through DOR- and not paying consultants a fortune to run it as OLR- was generating surpluses that the private TOCs on the route could only dream of.

Additional DfT costs? Without franchising you'd have fewer costs. And as the 2012 omnishambles cost the DfT the thick end of £100m, DOR would need a lot of extra management before the cost would get near that. (Yes, I know that £100m was TOC costs as well as DfT costs, but that £100m franchising cost-and the cost of unsuccessful bids elsewhere- gets factored into the franchise bids, so we end up paying anyway.

If the profit margin has dropped to 3% then I'll accept that, but my point still stands.

A lot of the investment only happens because it isn't on the Government balance sheet...

Network Rail borrowing does go on the balance sheet. That's the biggest railway spending.

Most major rolling stock purchases in recent times have not been through ROSCOs. They've been direct build-and-maintain deals with the manufacturers. This has sidelined the ROSCOs- Angel Trains have taken a massive loss on the 707s, which is just massively wasteful.

 

[hwl]

Running East Coast through DOR- and not paying consultants a fortune to run it as OLR- was generating surpluses that the private TOCs on the route could only dream of.

Additional DfT costs? Without franchising you'd have fewer costs. And as the 2012 omnishambles cost the DfT the thick end of £100m, DOR would need a lot of extra management before the cost would get near that. (Yes, I know that £100m was TOC costs as well as DfT costs, but that £100m franchising cost-and the cost of unsuccessful bids elsewhere- gets factored into the franchise bids, so we end up paying anyway.

If the profit margin has dropped to 3% then I'll accept that, but my point still stands.



Network Rail borrowing does go on the balance sheet. That's the biggest railway spending.

Most major rolling stock purchases in recent times have not been through ROSCOs. They've been direct build-and-maintain deals with the manufacturers. This has sidelined the ROSCOs- Angel Trains have taken a massive loss on the 707s, which is just massively wasteful.

EC(OLR) and DfT did end up paying a lot of consultancy fees - more than the average TOC would! Have a look at both East Coast and DfT accounts, very enlightening.

Many recent rolling stock orders also haven't been build, lease and maintain E.g. Anglia - Bombardier Aventra and Stadler, SWR Aventra, Scotrail Hitachi 385, LNWR Aventras and CAF DMUs, First GWR/Hull/TPE Hitachi 802s, GTR 717s, LO 710s, Northern 195/331.
Only 3 have been consortium build and maintain 700s, 800/801 and 345s. The first actually include 1 of the original ROSCOs as partners and the last has involved selling the rolling stock on via sale and lease back to one of the new ROSCOs.

The other big game changers for the traditional 3 Roscos has been:
- The arrival of 2 new well funded ROSCOs: SMBC (and variety of partners) from 2009 onwards and Rock Rail (and partners) from 2015 doing some large deals
- Beacon doing some small deals e.g. TPE mk5s.
- End of section 54, which means inappropriate stock can exit a Franchise far more quickly rather than being impossible to remove except to the scrap yard at life expiry. e.g. 455/456s, 175s

The Angel 707s were poorly specified (DfT have learnt lesson here and RDG+ ROSCO now have better defined minimum standards + expectations, revised 5 times between 2016-18) and expensive. SWT and Angel effectively had DfT captive as it was mid franchise variation and the winning bidder didn't like the cost of the 707s.

 

[Meerkat]

Just one example, and four years old, but shows tendering local trains saving 50% on DB charges.
https://www.railwaygazette.com/news...-stuttgart-passenger-operating-contracts.html

Hermann said the bids were all similar in price, at around half the €11·69/train-km the Land pays DB under a large contract dating from 2003. He said this showed that tendering was the right approach to procuring train services, and the money saved would be used to fund the additional services and new high-quality rolling stock.

Though possibly believe tendering in German has the advantage (to the buyers!) of not having to TUPE all the current staff????

 

[LNW-GW Joint]

Just one example, and four years old, but shows tendering local trains saving 50% on DB charges.
https://www.railwaygazette.com/news...-stuttgart-passenger-operating-contracts.html
Though possibly believe tendering in German has the advantage (to the buyers!) of not having to TUPE all the current staff????

The French Regions have exactly the same view about their SNCF contracts for TER services.
That's whether the contractor is privately- or publicly-owned.
They also want to buy rolling stock directly instead of through SNCF which they are obliged to do at the moment.

 

[Horizon22]

There are of course some benefits to nationalisation - unnecessary duplicity and complication such as the "blame game" being a key one - but when you actually look at what would change an affect passengers, 90% of what is in operation would be the same. It's why I'm fairly ambivalent towards the idea. What - as I'm sure most here know - is really needed is a significant uplift in investment so would be interesting if nationalisation could be sold if it involved an increase in taxes AND a continuation of the annual rise in fares.

 

[Horizon22]

So what you need is on rail competition....and certainly not nationalisation!

Only in the UK that's only really applicable on some long-distance routes where the paths are available. It isn't a suitable model for many parts of the country.

 

[yorksrob]

Only in the UK that's only really applicable on some long-distance routes where the paths are available. It isn't a suitable model for many parts of the country.

I'm not necessarily arguing for different companies (I note that on the Continent, some of the traditional railway companies have budget services), however it does seem to me that something like LNWR on perhaps the main IC routes is probably a better way of ensuring that longer distance rail travel remains available to the masses than the vaguaries of AP tickets which are stacked in TOC's favour.

Look how many paths have been made available on the ECML over the last couple of decades. It's not inconceivable to think that one of them could have been reserved for a provider with a low-cost walk on fares structure like LNWR.

 

[LNW-GW Joint]

I'm not necessarily arguing for different companies (I note that on the Continent, some of the traditional railway companies have budget services), however it does seem to me that something like LNWR on perhaps the main IC routes is probably a better way of ensuring that longer distance rail travel remains available to the masses than the vaguaries of AP tickets which are stacked in TOC's favour.

I'm not sure the DfT wants more LNWRs running inter-city routes.
The whole current money-go-round depends on maximising the returns from IC operators, so they can be reinvested in the regional/local services.
LNWR's job is to serve its franchise map with local services, not to compete head-on with the IC operator.

If this was like GWR out of Paddington, the DfT could merge the two Euston operators for "simplicity", at the expense of "competition".
Then they could merge Chiltern in as well and call it the London Midland Region.
And we would be back to square one.

If the new NR organisation is anything to go by, with TOC alignment to match, that's the sort of structure we are heading for.
LNER plus GN is a similar step in the same direction.

 

[Meerkat]

There are of course some benefits to nationalisation - unnecessary duplicity and complication such as the "blame game" being a key one

doesn’t the ‘blame game’ help efficiency and performance? Without proper delay attribution how do you know where to invest to improve performance?

I'm not sure the DfT wants more LNWRs running inter-city routes.
The whole current money-go-round depends on maximising the returns from IC operators, so they can be reinvested in the regional/local services.

This proves how nationalisation could be bad for passengers - competition is improving choice and reducing prices.

 

[yorksrob]

I'm not sure the DfT wants more LNWRs running inter-city routes.
The whole current money-go-round depends on maximising the returns from IC operators, so they can be reinvested in the regional/local services.
LNWR's job is to serve its franchise map with local services, not to compete head-on with the IC operator.

If this was like GWR out of Paddington, the DfT could merge the two Euston operators for "simplicity", at the expense of "competition".
Then they could merge Chiltern in as well and call it the London Midland Region.
And we would be back to square one.

If the new NR organisation is anything to go by, with TOC alignment to match, that's the sort of structure we are heading for.
LNER plus GN is a similar step in the same direction.

This is probably true, because the DfT aren't really that interested in getting the best value for passengers. They're more interested in the best value for taxpayers (which unfortunately means wringing passengers).

But if a government ever felt that the railways were a public good and that it was important that they were affordable to the masses, this would be a way to do it.

The LNWR example is interesting because the traditional IC model seems to have survived unscathed without the sky falling in. Perhaps franchising needn't be dead afterall.