Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence


Memorandum by The Railway Reform Group (PRF 09)

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 be helpful.

  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 do".

  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 that:

    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 extended ones:

    —  Better punctuality and reliability.

    —  Reductions in overcrowding.

    —  Improved safety and personal security.

    —  Integrated transport measures.

    —  Improved accessibility for disabled people.

    —  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 Committee are:

  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 1 vehicles.

  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 plan—or 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 so.

    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 inappropriate attitudes.

    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.

September 2001


 
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