Memorandum by The Railway Reform Group
PASSENGER RAIL FRANCHISING
The Railway Reform Group particularly welcomes
the opportunity to present evidence to the Transport Committee
on the implications for rail services of the Governments recent
changes of policy.
An independent non-judicial Inquiry into the
current state of the industry, together with a clear set of recommendations
attuned to both financial viability and practical delivery is
something we have been attempting to persuade Government itself
to undertake since prior to the last Election. We regret that,
despite representations at the highest level in conjunction with
other industry groups, DTLR were more concerned as to the cost
of such an Inquiry rather than the establishment, through informed
consensus, of any desirable outcomes from such a process.
In these circumstances we hope particularly
that the Transport Committee's own Inquiry will provide sufficient
evidence for radical action to combat the rail industry's apparently
constant failings. We also hope that although the Committee has
focussed on aspects of delivery affecting the passenger railway,
it will not wholly ignore the effects that franchising policy
has upon the freight railway together with the failure of the
central role of Railtrack and therefore be able to express an
holistic view in it's Recommendations.
The policy changes have been outlined in both
the draft Objectives, Instructions and Guidance to the Strategic
Rail Authority and the draft Statement on Passenger Rail Franchising.
The Railway Reform Group has been consulted formally on both these
drafts by the DTLR and we would be pleased to submit copies of
our response to this consultation to the Committee if this would
In the course of determining our response to
the consultation we held, for the first time, an Open Forum to
which a wide range of parties, some of whom were not formal consultees',
contributed. These included academics, advisers to the Welsh Assembly
and Scottish Executive, individual Train Operating Companies,
the Institute of Logistics and Transport, independent members
of the Rail Passengers Council, Freightliner, the Local Government
Association and Transport 2000, in addition to members of the
RRG who continue to be employed within the industry with Railtrack,
TOCs' and in major international transport consultancies. The
Open Forum was conducted under the independent chairmanship of
the BBC's Northern Transport Correspondent, Alan Whitehouse.
With such a broad range of potential views represented
the most surprising outcome of the Forum was the degree of unanimity
as to the proposed way forward for the industry. The consensus
which emerged has been accurately reported by Roger Ford in the
September 2001 issue of "Modern Railways" under the
title of "A Manifesto for Recovery".
The overwhelming view of contributors to the
Open Forum on the need and direction for change in the industry
was in sharp contrast to the "establishment" view, best
expressed by Sir Alastair Morton, Chairman of the Strategic Rail
Authority, at the Institute for Public Policy Research "Rail
Renaissance" Conference on the 21 February 2001 when he stated
"The UK rail industry is the biggest public-private
partnership in Europe and the consensus in the industry is not
to change the structure, but to make it evolve radically."
Putting aside the questions of semantics and
tensions arising between radical evolution and immutable structures,
our view is that this complacency, also shared by Railways Directorate
within DTLR, on the basis of RRGs discussions with the Department,
was then and is even more so now, wholly untenable.
Such complacency and its associated "short-termism"
demonstrates the extremes to which our allusion to the "virtual
reality railway" (which we referred to in our evidence to
the Transport Committee's Inquiry into Rail Investment last July)
has now been taken. If this is the basis on which Government's
policy changes are now being considered and taken forward then
we would be wholly justified in expressing considerable pessimism
for the industry's future as well as having some belief in the
widely reported remarks made by Sir Alastair Morton announcing
his decision to step down from the Chairmanship of the SRA:
"Announcing his intention to bow out he
said: "Presentation is what our political masters stress,
hoping it accords better with public aspirations than the facts
Leading on from these remarks it is of some
concern to RRG that there has been so little public comment on
the associated draft on Directions Under Section 26(1) of the
Railways Act, 1993 which was almost sneaked out by DTLR on the
back of the draft Franchising Policy Statement. Given the possible
implications of the use, or potential abuse, of Directions under
Section 26 (1) we would have expected some greater level of comment.
These draft directions have a potential two-fold effect. Firstly
they give complete discretion to the Secretary of State on who
shall be awarded a franchise and secondly they also give complete
discretion to the Secretary of State as to the process by which
that award shall be made.
The most cynical interpretation we have heard
of this change in policy is that it is designed wholly to avoid
the possibility of judicial review of the outcome of a contentious
franchise award. We are content to await confirmation of this
interpretation, before we share it, by announcements to the effect
1. Connex have been awarded a franchise for
Transpennine Express, in the teeth of very vocal opposition from
users, local authorities and Passenger Transport Executives (whose
role as funding providers is to be consequently reduced) and,
2. GNER have been awarded a significant new
franchise for the East Coast Main Line despite threats from Sir
Richard Branson requesting a judicial review of such an outcome.
Despite such pessimism it would be ungracious
to presume that all of the recent changes in policy could be detrimental
to the future of the industry. Indeed in Section 10 of the Franchising
statement we read that:
In all new franchises, the SRA will invite bids
against a clear specification of core outputs. Our purpose is
to ensure that in negotiations everyone can be clear what the
Government is trying to achieve. The SRA, focussing on 10 Year
Plan priorities within its overall strategy, will give details
of the outcomes it wants. There will still be flexibility for
bidders to put forward their own (additional) proposals. But the
common core specification will ensure that the fundamentals of
different bids are directly comparable.
We would hope that with such clarity of expression,
providing it is within the competence of the SRA to achieve it,
the entire process of franchising would become considerably speedier,
provide greater transparency and enable clear value for money
comparisons to be made. This should be the case but regrettably
the draft statement then goes on to both define "outputs"
in a less than helpful way and in addition says that "not
all of these will be necessary in any given franchise".
We feel it would be instructive for users if
Government, through the SRA, would delineate which of the following
benefits are not necessary in any franchise, let alone new or
Better punctuality and reliability.
Reductions in overcrowding.
Improved safety and personal security.
Integrated transport measures.
Improved accessibility for disabled
Putting passengers first.
Improved station facilities.
Improved passenger information.
Against this background of apparent stasis (which
has led to even greater uncertainty and confusion within the industry)
we would consider that many of the answers to particular areas
of concern which the Transport Committee have identified within
its terms of reference for this Inquiry become almost self-evident.
Our comments on the specifics raised by the
The Committee will consider whether this new
approach, which includes placing the emphasis on the negotiation
of changes and short extensions to existing franchises, rather
than on the awarding of new long-term contracts, will:
Ensure that rapid improvements in
the safety, punctuality, reliability, comfort and frequency of
services are achieved.
Without a definition of time period it is difficult
to assess the likelihood of success in these areas, but we assume
that rapid is associated with timescales defined by a combination
of the timing of the next election, the two year period associated
with extensions to franchises which are possible under the current
franchise agreements and the known delivery patterns of new rolling
stock, orders for which have been driven (particularly in London
and the South-East) by the requirement for replacement of Mark
Insofar as safety improvements are concerned
these are primarily associated with the Train Protection Warning
System implementation. Railtrack are known to be finding it difficult
to adhere to the existing planned implementation and consequently
the programme is at risk.
With regard to both punctuality and reliability,
starting from the low base to which the industry has sunk following
the gauge-corner cracking crisis we hope that there would be unreasonably
rapid improvement in many areas. However with the greatest percentage
of delay and consequential unreliability still being the responsibility
of Railtrack and this proportion being forecast to rise substantially
over the next year we see little radical improvement in these
areas in the near future. In addition there will be performance
risks associated with the introduction of new rolling stock although
this will undoubtedly improve the comfort of those able to obtain
a seat, providing one conforms to the designers stereotype of
the average human frame and does not always have a weakness for
a view out of the window.
Secure investment in additional network capacity
and other improvements to meet both the long and short-term needs
of the railways and whether the sums allocated to rail investment
remain adequate in the light of events since the publication of
the Government's ten-year plan for transport;
At least here there was the most rapid convergence
of views from the industry since privatisation:
The Association of Train Operating Companies,
which represents companies such as National Express Plc, Go-Ahead
Group Plc, Arriva Plc and First Group Plc, said short-term contracts
would not provide the large-scale investment required to improve
rail services. "In the short term, franchise extensions may
help bring early passenger benefits to some of our members who
want to get on with the business of negotiating these as quickly
as possible," a spokeswoman for the train operators said.
"But in many cases only long-term refranchising will deliver
the investments for the sort of improvements in punctuality, comfort
and safety that rail operators, passengers and the government
want to see."
LONDON, July 16 (Reuters)
We entirely agree.
As to the adequacy of (public) funding contained
within the delivery mechanism of the 10 Year Plan, we can do no
better than quote from the Annual Report of the SRA
"Separately, the SRA warned the government its
10-year plan to spend 63 billion pounds of public and private
funds on modernising the creaking rail system risked failure unless
more funds were provided. A combination of a train crash last
October, rail network operator Railtrack Group Plc's funding problems
and the rail regulator revising track charges to fund Railtrack
has increased demand on SRA funding, SRA said in its annual report.
As a result it is necessary to reassess the 63 billion pounds
funding for rail foreseen in the 10-year planor the plan
itself, risks both failure to deliver the plan's outcomes and
incomplete coverage of the national rail system"
LONDON, July 16 (Reuters)
Again, we entirely agree particularly given
the accepted economic theory of effective proportions of public/private
funding which the SRA was seeking to overturn anyway. The situation
can only worsen if Railtracks credit rating is revealed to have
been downgraded and it is no longer able to borrow at very low
rates (currently around 4 per cent) and is forced to pay market
rates for capital. There is a very real possibility of this despite
the efforts of the new Chairman whose indignation with supposed
bureaucracy is providing a veneer for essential cost cutting to
stabilise Railtracks financial position.
Provide the framework for major infrastructure enhancement
projects to be taken forward now that Railtrack is to focus on
the maintenance and renewal of the existing network;
The continuing dependence of Government policy
on Railtrack having a central role in operating and enhancing
the network, despite having consumed 50 per cent of the public
funding available in the 10 Year Plan as revenue support, is simply
no longer credible. The alternative, for the foreseeable future,
must lie with the development of Joint Ventures and Special Purpose
funding Vehicles as the only possible avenue for real enhancement.
Government, in these circumstances, may wish to consider carefully
whether it is in fact franchising the right type of contractual
construct for the industry. We strongly suggest it is not doing
Transform the SRA's leadership of the industry,
its day-to-day management of franchises and the way in which it
assesses and awards new and extended contracts for passenger services;
If the SRA is to be required to "invite
bids against a clear specification of core outputs" this
clarification of process should assist in developing the competence
of the SRA. It may actually have to understand that the core output
of the industry is its timetable and that a nationally integrated
timetable, as we have long advocated, would obviate the conflicting
demands of a discrete franchising process. The potential for increased
value for money from such a core product should also appeal to
both DTLR and HMT. It would undoubtedly assist in restoring the
reputation of the railways core product which has descended to
a level at which users feel they are participating in a daily
Lottery with similar chances of reward.
We feel it is unlikely that transforming the
SRA's leadership of the industry and it's day to day management
of franchises will be achieved easily without transformation of
the leadership and day to day management of the SRA itself. Even
when this has been done there will be a very significant amount
of work to do in re-building positive relationships which have
been squandered as a result of the maintenance of long established
Improve the poor state of industrial relations
in the railways.
We currently see no benefit in any of the changes
in policy outlined which contribute to the improvement of industrial
relations per se and it could reasonably be argued that the current
stasis is actually having a negative effect. The current industrial
dispute affecting c2c is unrelated to any aspect of the policy
changes and results principally from that company's failure to
accept an otherwise accepted commitment on the part of other TOCs.
If the poor state of industrial relations is
a function of poor morale which extends throughout the industry
then it would be fair to say that a change in morale may be brought
about by greater certainty. It is however unlikely to be a speedy
process, despite valuable work having been undertaken by both
DTLR which has designated Human Resources as a Priority One for
Rail Research and the Rail Industry Training Council which is
shortly to publish a Report on Analysis of Priority Skill Needs
in the Rail Industry.
In concluding this memorandum we take this opportunity
to express our view that the current problems of the industry
are both structural and managerial. Whilst changes in policy proposed
so far may have some marginal effect on the former, at the least
by providing a very short term view, we believe they are unsustainable
in the longer term.
Without a significant re-assessment of both
the level of and value for money measures of public funding there
is every possibility that delivery of the 10 year Plan targets
(on which DTLR are now wholly focussed in terms of "50/80/PIXC")
that is, growth of 50 per cent in passengers, 80 per cent in freight
and maintenance of Passengers in Excess of Capacity as determined
in Passengers Charters, will be confined solely to London and
the South East. If this were to be the case the railway North
of Watford and Peterborough and west of Reading will simply be
left to rot.
The Railway Reform Group strongly believes Britain
deserves and already pays for a safer, better, bigger railway.
The way forward is through radical reform not radical evolution.