TSC Franchising Report

[The Planner]

This government will always be soft on the companies that own the franchises because these companies bankroll the Tories.
If you dig deep into the finances of this government you will see who really runs this country.
It's not altruism that makes big business contribute to the Tory party. They do it in return for favours.
When the tenders are issued for HS2, I guarantee that the biggest recipients of taxpayers money will be financial contributors to the Tory party.
Take a look at how much money the Tories had to spend in their election campaign and how much labour had. Thatcher ensured that labours union contributions would be strangled. But who will do the same to the big Business contributions that keep the Tory party in government?
Of coarse nothing is going to change after this transport committee report. I suppose that is the birtish form of democracy. Privelige will always usurp necessity and the greater good.

New tin foil hat needed. Evidence?

 

[yorksrob]

I think this is one of the biggest issues with GTR. They are trying to run the service by maximising the trains on track, minimising the number of crew needed to crew those trains, and minimising the number of units they have in reserve.

The outcome is that the moment anything goes wrong it impacts on many other services. It appears to be luck as to whether the service actually recovers or disappears down the plughole.

This is where franchising seems to fail it encourages the minimum of resources.

Also track access charges, and in some cases rolling stock leasing costs act as an incentive to run fewer, shorter trains than track and rolling stock availability might allow.

 

[HH]

I think this is one of the biggest issues with GTR. They are trying to run the service by maximising the trains on track, minimising the number of crew needed to crew those trains, and minimising the number of units they have in reserve.

The outcome is that the moment anything goes wrong it impacts on many other services. It appears to be luck as to whether the service actually recovers or disappears down the plughole.

This is where franchising seems to fail it encourages the minimum of resources.

The problem is that the whole Thameslink programme, as envisaged by DfT, is flawed. GTR are running less than the number of trains envisaged by DfT; equally the number of trains was largely decided by DfT.

They do need more drivers, but the shortage was in place pre-GTR and it can take quite a while to sort out - apart from the lead time required, there are pinch points around training resources. That's not to say they are blameless, but DfT have a chance during the franchise letting process to revise any plans that they don't think are robust. Their technical advisers (I seem to recall it was Atkins) didn't do a very good job.

 

[ChiefPlanner]

Also track access charges, and in some cases rolling stock leasing costs act as an incentive to run fewer, shorter trains than track and rolling stock availability might allow.

Don't forget station access charges ? (measured per vehicle / call) , and the capped milege on train fleets. (incentive to keep below threshold - so pay less)

Such are the magnificent legacies of the "privatised and contracted railway"

DfT could order NR to remove some of these issues at stroke. Except that ot many working people down there really understand the railway and it's present construction blocks.

 

[yorksrob]

Don't forget station access charges ? (measured per vehicle / call) , and the capped milege on train fleets. (incentive to keep below threshold - so pay less)

Such are the magnificent legacies of the "privatised and contracted railway"

DfT could order NR to remove some of these issues at stroke. Except that ot many working people down there really understand the railway and it's present construction blocks.

Indeed yes. I'd forgotten about that one.

If we must have franchising, surely it's not beyond the wit of man to calculate a flat rate for the railways users.

 

[ChiefPlanner]

Indeed yes. I'd forgotten about that one.

If we must have franchising, surely it's not beyond the wit of man to calculate a flat rate for the railways users.

Exactly - and someone , somewhere huddles over a spreadsheet working this is out , checking it and sending it around the contractual system.

Not a scrap of this drudgery , of course , assists the fare paying (or avoiding) customer.......in the case of GTR , this probably equates to about 3 back office jobs - so around £175K per annum.

 

[Dr Hoo]

For the education of those of us less exposed to the pleasures of modern railway management can somebody confirm that GTR really does have three staff manually administering station access charges (bearing in mind that it is the Station Facility Owner/lessee for most of the stations at which its trains call).

I appreciate that GTR will have to pay at locations such as Havant and Cambridge.

 

[WelshBluebird]

New tin foil hat needed. Evidence?

Not sure why that is tin foil hat tbh.

It is fairly well known that big business generally donates to the Conservatives. And no doubt they will have their own agendas. Why else do you think you end up with things like them being able to get pretty close access to MPs in return for donations?
It is a lot more obvious if you look at the US (with large lobbyists giving a hell of a lot of money in return for a degree of influence) and you'd be naive to think it doesn't happen here either. Hell, when many politicians are up to it themselves (massive conflicts of interest where some are landlords ruling on tenancy laws, or have direct interests in private healthcare companies ruling on the NHS) are you really surprised that they would also be willing to take money for a degree of outside influence?

 

[HH]

Exactly - and someone , somewhere huddles over a spreadsheet working this is out , checking it and sending it around the contractual system.

Not a scrap of this drudgery , of course , assists the fare paying (or avoiding) customer.......in the case of GTR , this probably equates to about 3 back office jobs - so around £175K per annum.

I can confirm that this will NOT be the case. Station Access charges are generally calculated once per annum; it does take a little while because every cost aspect has to be checked for every station that other operators call at, but still it's only a part of one person's job.

 

[HH]

Not sure why that is tin foil hat tbh.

It is fairly well known that big business generally donates to the Conservatives. And no doubt they will have their own agendas. Why else do you think you end up with things like them being able to get pretty close access to MPs in return for donations?
It is a lot more obvious if you look at the US (with large lobbyists giving a hell of a lot of money in return for a degree of influence) and you'd be naive to think it doesn't happen here either. Hell, when many politicians are up to it themselves (massive conflicts of interest where some are landlords ruling on tenancy laws, or have direct interests in private healthcare companies ruling on the NHS) are you really surprised that they would also be willing to take money for a degree of outside influence?

Big business generally. But do you have any evidence that rail business specifically do? I certainly know of several that definitely don't.

 

[Alfie1014]

I think this is one of the biggest issues with GTR. They are trying to run the service by maximising the trains on track, minimising the number of crew needed to crew those trains, and minimising the number of units they have in reserve.

The outcome is that the moment anything goes wrong it impacts on many other services. It appears to be luck as to whether the service actually recovers or disappears down the plughole.

This is where franchising seems to fail it encourages the minimum of resources.[/QUOTE

And exactly the same as BR did, I well remember the 3 Southern divisions obsession with vehicle miles and crew establishment. Not much change there!

 

[Clarence Yard]

It really, really was a tin foil hat rant moment.

As someone who is in the political trade (I am a Constituency Agent - a voluntary job) as well as being a full time railwayman, I have to live with the donation legislation and what it entails. The Blair government altered the rules on the visibility of significant donations as well as their eligibility so they have to be declared. They are all on the Electoral Commission website these days in mind boggling detail.

There are also rules about companies making them more visible to shareholders and others. This has made some companies think twice about how they engage with the political community and the use of lobbyists and personal contact (directly or through industry groups) has now a greater emphasis than what it did.

The major transport groups in this country don't tend to donate to the Tories - they don't need to and some wouldn't anyway as they favoured other parties. The SNP or Scottish Labour were the party of choice for two long standing owning groups. The owning groups usually have their "access routes" already sorted out so why would they need to publicly flash the cash in that way?

The relative visibility in political donations here puts other countries to shame.

 

[daikilo]

I agree with others that there is not a lot new in this report however I did note the section on open access and in particular these paragraphs:

34. Open access has been a success, albeit on a limited scale to date. The balance of evidence points to potential benefits in open access having an expanded role on long distance routes, beyond just filling marginal capacity or connecting unserved markets. Although it is not a complete substitution to franchising because of fragmentation risks. It is important to note that there are operational complexities that need to be addressed and we acknowledge that it will take time to test open access on a larger scale, to fully understand its feasibility, particularly in terms of operational risks.
35. In the context of declining market interest in franchising, open access may be an avenue for new and smaller entrants into the market. Additionally, given the lack of an operator of last resort, open access operators may be able to serve a role in franchise enforcement—possibly through the reallocation of capacity away from underperforming franchisees.

I am intrigued that they think open access has been a success unless they are looking to the future. Also, they use the words "... although it is not a conplete substitution to franchising..." which could imply that more should be encouraged. Surely this is both adding risk to the franchisee and potentially reducing premium payments to the DfT, even if it may be theoretically beneficial to the passenger (but is there any real fare competition on the ECML?). Also, the last sentence on using Open Access for franchise enforcement is intriguing and I suspect a pipe-dream.

 

[yorksrob]

I agree with others that there is not a lot new in this report however I did note the section on open access and in particular these paragraphs:

34. Open access has been a success, albeit on a limited scale to date. The balance of evidence points to potential benefits in open access having an expanded role on long distance routes, beyond just filling marginal capacity or connecting unserved markets. Although it is not a complete substitution to franchising because of fragmentation risks. It is important to note that there are operational complexities that need to be addressed and we acknowledge that it will take time to test open access on a larger scale, to fully understand its feasibility, particularly in terms of operational risks.
35. In the context of declining market interest in franchising, open access may be an avenue for new and smaller entrants into the market. Additionally, given the lack of an operator of last resort, open access operators may be able to serve a role in franchise enforcement—possibly through the reallocation of capacity away from underperforming franchisees.

I am intrigued that they think open access has been a success unless they are looking to the future. Also, they use the words "... although it is not a conplete substitution to franchising..." which could imply that more should be encouraged. Surely this is both adding risk to the franchisee and potentially reducing premium payments to the DfT, even if it may be theoretically beneficial to the passenger (but is there any real fare competition on the ECML?). Also, the last sentence on using Open Access for franchise enforcement is intriguing and I suspect a pipe-dream.

I think open access has been a roaring success in that its achieved exactly what it set out to do. It's developed supressed demand at locations such as Hull, Brough, Hartlepool and Sunderland beyond what would have been possible just with connections. It's also provided a modicum of price (and product) competition in places such as York, Doncaster and Wakefield.

How much of it the railway economy can actually bear remains to be seen. I don't think its a panacea for the InterCity network, however it should be encouraged to develop new markets.

 

[Moonshot]

I think open access has been a roaring success in that its achieved exactly what it set out to do. It's developed supressed demand at locations such as Hull, Brough, Hartlepool and Sunderland beyond what would have been possible just with connections. It's also provided a modicum of price (and product) competition in places such as York, Doncaster and Wakefield.

How much of it the railway economy can actually bear remains to be seen. I don't think its a panacea for the InterCity network, however it should be encouraged to develop new markets.

Completely agree with this , hopefully some more entrants will take the risk. I know its not comparing apples with apples etc, but ever since open skies policy has been introduced , the low cost airlines have gone from strength to strength.

 

[LNW-GW Joint]

Completely agree with this , hopefully some more entrants will take the risk. I know its not comparing apples with apples etc, but ever since open skies policy has been introduced , the low cost airlines have gone from strength to strength.

Many people on here call that "the race to the bottom".
Sometimes they are the same ones who say they want more competition...
Or nationalisation.

 

[yorksrob]

Many people on here call that "the race to the bottom".

That might have been true, but for the fact that open access operations aren't typically lower quality than the franchised ones. Of course, this might change with the proposed London - Scotland service as that's been designed to emulate a low cost airline !

 

[glbotu]

Many people on here call that "the race to the bottom".
Sometimes they are the same ones who say they want more competition...
Or nationalisation.

Low cost airlines aren't quite a "race to the bottom", because they have sought to expand their routes. Yes, they are competing on price, at the cost of convenience, but they have increased the frequency and capacity of their routes to match demand. It's not like all easyjet flights are instantly booked out the moment they go online and unlike longer distance carriers, they don't tend to overbook their flights.

But anyway, the comparison is pretty terrible, because with the exception of Heathrow, most airlines don't have to worry about running out of capacity, whereas the railways are at a point where that is very much the case. If we had non-trivial amounts of spare capacity, we'd be having all kinds of muti-option railway services, with plenty of competition.

The problem is that you can only have on-rail competition where

a) Capacity is not at a premium,
b) Rail is a discretionary choice.

The OAOs are saying "here's capacity that isn't being used, hey, why not take the train instead of that smelly car". Franchised operations are there for people who don't have the choice, which realistically is not much different from a nationalised railway with Open Access (the French model), which is kind of the cut-and-thrust of the document.

 

[daikilo]

Low cost airlines aren't quite a "race to the bottom", because they have sought to expand their routes. Yes, they are competing on price, at the cost of convenience, but they have increased the frequency and capacity of their routes to match demand. It's not like all easyjet flights are instantly booked out the moment they go online and unlike longer distance carriers, they don't tend to overbook their flights.

But anyway, the comparison is pretty terrible, because with the exception of Heathrow, most airlines don't have to worry about running out of capacity, whereas the railways are at a point where that is very much the case. If we had non-trivial amounts of spare capacity, we'd be having all kinds of muti-option railway services, with plenty of competition.

The problem is that you can only have on-rail competition where

a) Capacity is not at a premium,
b) Rail is a discretionary choice.

The OAOs are saying "here's capacity that isn't being used, hey, why not take the train instead of that smelly car". Franchised operations are there for people who don't have the choice, which realistically is not much different from a nationalised railway with Open Access (the French model), which is kind of the cut-and-thrust of the document.

I think this attempt to compare with the airline industry is misleading as there is (now) no equivalent to franchising in Europe, so BA and any other airline are on an equal footing, apart from LHR slots. In addition, BA can modify its destinations, frequencies and service levels without any need to consult say the DfT which is not possible with Rail franchisees.

As to the French model, there are no passenger OAOs at all in France unless you call Ouigo an OAO (it is in fact a subsidiary of SNCF and borrows their trains). Not only that, but unlike DB, there is no competition at all when the local authorities restructure their TER operations and as far as I am aware there will be none with the new TETs. There are a few local operators who have kept lines open that otherwise would have closed. This is very much an attitude of French pollitics i.e. vote in favour of something in Brussels but don't then apply it. Note that DB also has a few OAO trains.

 

[LNW-GW Joint]

I think this attempt to compare with the airline industry is misleading as there is (now) no equivalent to franchising in Europe, so BA and any other airline are on an equal footing, apart from LHR slots. In addition, BA can modify its destinations, frequencies and service levels without any need to consult say the DfT which is not possible with Rail franchisees.

As to the French model, there are no passenger OAOs at all in France unless you call Ouigo an OAO (it is in fact a subsidiary of SNCF and borrows their trains). Not only that, but unlike DB, there is no competition at all when the local authorities restructure their TER operations and as far as I am aware there will be none with the new TETs. There are a few local operators who have kept lines open that otherwise would have closed. This is very much an attitude of French pollitics i.e. vote in favour of something in Brussels but don't then apply it. Note that DB also has a few OAO trains.

DB, SNCF, NS and now FS are quite happy to exploit openings in the UK though.
DB Regio don't win all their regional contracts, and they all buy the "other brand" of trains at times (not often).
It's also confused by Alstom and Bombardier having plants in the "other" countries, so you can buy Bombardier and still buy French.
They are not happy when Stadler wins, though.

I think the point about the LCC airlines is that they forced the legacies to change their game, hence big employee issues at BA, Iberia, Air France and Lufthansa about pay and conditions.
I am very happy to fly U2 and FR, but I'm well aware of the impact on legacy airlines.
The airports also had to change, they no longer try to keep the LCCs out.
BA dumped its regional operations, after all.

One thing about our OA operators - I get the impression the staff are more flexible that the franchised ones, drivers helping out on board, that sort of thing.

 

[Gareth Marston]

Are we heading back to "cheap and cheerful trains for typists" envisaged by the Tory Minister from the 90's?

On track competition as pined for by the right simply cannot happen due to capacity constraints on today's railways. OA is incompatible with franchises that need to pay premium / have subsidy.

The MP's are beating around the bush the only sensible private sector model would be to recreate the Big 4 plus ScotRail as vertically integrated entity..

 

[glbotu]

I think this attempt to compare with the airline industry is misleading as there is (now) no equivalent to franchising in Europe, so BA and any other airline are on an equal footing, apart from LHR slots. In addition, BA can modify its destinations, frequencies and service levels without any need to consult say the DfT which is not possible with Rail franchisees.

As to the French model, there are no passenger OAOs at all in France unless you call Ouigo an OAO (it is in fact a subsidiary of SNCF and borrows their trains). Not only that, but unlike DB, there is no competition at all when the local authorities restructure their TER operations and as far as I am aware there will be none with the new TETs. There are a few local operators who have kept lines open that otherwise would have closed. This is very much an attitude of French pollitics i.e. vote in favour of something in Brussels but don't then apply it. Note that DB also has a few OAO trains.

While there are no total OAO operations in France, my understanding is that DB/Thalys etc. run as OAOs on French tracks (like when you get an ICE from France to Germany) and do abstract some revenue (for example, Paris Est - Frankfurt stops at Strasbourg). Open Access is a legal EU requirement for high speed railway lines, provided the capacity is there.

 

[daikilo]

While there are no total OAO operations in France, my understanding is that DB/Thalys etc. run as OAOs on French tracks (like when you get an ICE from France to Germany) and do abstract some revenue (for example, Paris Est - Frankfurt stops at Strasbourg). Open Access is a legal EU requirement for high speed railway lines, provided the capacity is there.

Thalys is a joint venture of SNCF, SNCB and DB. They operate services (also with NS) in agreement on behalf of and with each other and in no way compete as such. In effect, it is just a marketing name.

As to EU legal requirements, someone should maybe try enforcing them (outisde the UK and Italy of course).

 

[Moonshot]

Are we heading back to "cheap and cheerful trains for typists" envisaged by the Tory Minister from the 90's?

On track competition as pined for by the right simply cannot happen due to capacity constraints on today's railways. OA is incompatible with franchises that need to pay premium / have subsidy.

The MP's are beating around the bush the only sensible private sector model would be to recreate the Big 4 plus ScotRail as vertically integrated entity..

Isnt the idea of vertically integrated franchises already on the table anyway? Ie breaking up Network Rail into smaller chunks and parcelling it up with the TOCs ? In effect Network Rail becomes the sytem operator , and investment in the network is provided by the private sector? A few have mentioned this ( including the Unions ) as a possible future scenario.

 

[HH]

Vertically integrated franchises would be a disaster without proper preparation. Sounds great from the comfort of your ivory tower or seat in front of the monitor, but the practical issues are huge, not least that TOCs and NR have completely different corporate cultures - not the best basis for integrating operations as many commercial firms have found to their cost.

 

[daikilo]

Vertically integrated franchises would be a disaster without proper preparation. Sounds great from the comfort of your ivory tower or seat in front of the monitor, but the practical issues are huge, not least that TOCs and NR have completely different corporate cultures - not the best basis for integrating operations as many commercial firms have found to their cost.

Sitting in front of my PC, I don't understand your logic. At present TOCs basically have to put up with what NR decides/agrees to do so the TOC is notionally below NR. If the TOC dictated what NR should do then it would be the other way round. In this case the so-called vertical integration actually means that the TOC and NR work together to find the optimum solution and determine the optimum spend. In my mind this means they are officially on an equal footing and want to work together. This is neither vertical nor horizontal but working together and most firms find that is good. At the end of the day, the variable money comes from the passengers.

 

[The Planner]

Sitting in front of my PC, I don't understand your logic. At present TOCs basically have to put up with what NR decides/agrees to do so the TOC is notionally below NR.

If only that was the real case.

 

[LNW-GW Joint]

Thalys is a joint venture of SNCF, SNCB and DB. They operate services (also with NS) in agreement on behalf of and with each other and in no way compete as such. In effect, it is just a marketing name.
As to EU legal requirements, someone should maybe try enforcing them (outisde the UK and Italy of course).

There are plenty of Open Access freight operators across Europe.
The EU has more power over cross-border operation than domestic, and the regulations are still evolving.
DB (in France) and SNCF (in Germany) are reciprocal cross-border operations.
Thello is also an open access operation (Paris-Venice, Milan-Marseille), though its owners are public sector.
There are domestic OA operators in CZ and AT, competing head to head with the state railway.

 

[infobleep]

The Transport Select Committee report into rail franchising, which is all over the media this morning, is here: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmtrans/66/66.pdf

It should go some way to answering Christian Wolmar's perennial question "what are franchises for".
It does not contemplate ditching the entire system, but proposes major changes.

Main points:
- smaller but longer franchises (more bidders, lower risk, more owner investment - ie more Chiltern-like)
- transfer franchise monitoring and enforcement to ORR or other independent body
- more open access, with access charging regime from CP6 making them pay towards fixed costs
- the concept of a PSO grant for specific services (franchise or open access). This is a bit like trying to make the BBC share the TV licence fee.
- make franchise periods match Network Rail funding cycles to avoid mismatches in expectations and delivery
- end the fares ratchet which skews increases from taxpayer to passenger
- DfT overloaded by current franchise schedule, make some longer direct awards for low-risk franchises to clear the decks
- improve integrated transport planning (eg airports, example is Stansted)
- no repeat of TSGN (too big, not enough risk on TOC, poorly monitored)
- unhappy with West Coast Partnership rationale
- more transparency on the content of competing bids is needed (after award)

All told, a good review of recent practice.
Whether DfT takes any notice of it is another matter.
One topic I can't see discussed is devolution, which could alter the franchise map considerably.

I do like the idea of being transparent with the bids after the awards. People can then judge whether they think the award was fair and right choice. Of course one would get armchair critics but may be knowledgeable people might give insight on why such and such won over another.

 

[daikilo]

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