Posted 26th June 2023 | 5 Comments

COMMENT: That’s the end of the franchise era, then

The Scottish Government assumed control of the Caledonian Express contract yesterday, after Transport Scotland had decided that an extension of Serco’s franchise would not offer value for money (writes Sim Harris).

The formal changeover, if usual industry practice was followed, would have been at 02.00 on Sunday morning, when legal responsibilities would have been transferred.

The nationalisation of another private sector operator was not particularly unusual. It is just under a month since FirstGroup’s National Rail Contract for Transpennine Express was transferred to a company owned by the Department for Transport’s Operator of Last Resort.

But the Sleeper changeover was slightly different. The last TPE franchise was effectively paused in March 2020 when the first Emergency Measures came into effect, and was officially abolished, along with all other English franchises, in September of the same year.

Caledonian Sleeper was still technically a franchise, although it too had been paused in April 2020 and was being administered under an Emergency Measures Agreement with the Scottish Government.

As such, it was the last of its kind, which meant the final train run by a franchised operator from London Euston departed at 23.45 on Friday night, bound for Edinburgh and Glasgow Central.

The first franchised train, incidentally, was South West Trains’ departure from Twickenham to London Waterloo at 05.10 on 4 February 1996. (Great Western Trains should have been first, with its unadvertised 01.50 service from Fishguard Harbour. This, had it departed on time, would have moved seamlessly into the new era somewhere near the site of the former Jordanston Halt. In the event the train was replaced by a bus because of engineering work further down the line, and the bus was late.)

Operators now fall into three categories. The first are owned by government, the second have National Rail Contracts, and the third have less specific Direct Awards, such as Avanti West Coast.

This does not prevent the mainstream media referring from time to time to ‘franchises’. and even some operators (who should know better) still mention their ‘franchise area’.

In theory, at least, the creation of Great British Railways should usher in new Passenger Service Contracts which, if the recommendations of Keith Williams in the 2021 Plan for Rail are followed, will be very similar to the low-risk concessions which already apply on operators like London Overground. LO is run by Arriva, but the contract with Transport for London is a tight one, and although Arriva is exposed to minimal commercial risk, it also has very little commercial freedom.

What is still unclear is just what a Passenger Service Contract will involve. Privatisation enthusiasts, both within and outside the industry, want these contracts to be as loosely framed as possible, to allow the private sector to take a significant part. On the other hand, those in favour of public ownership opt for full-strength nationalisation.

As things stand, the government is deeply engrossed in other problems –particularly how to win the next election – so GBR has been left on the platform waiting, you might say, for a train (or rail replacement bus) which has yet to turn up.

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • david C smith, Bletchley

    It does appear that any " goodies" that privatisation could have delivered for passenger service have been largely "knocked on the head" by government, from the inception of the Strategic Rail Authority onwards. i 'm largely persuaded that the passenger railway contains such diversity of possible users and their needs that no one "umbrella" can be right for them all, and so look for a more "horses for courses" structure. And again, I point to a future of operating companies being government "puppets", run by people with no ideas re. future investment and growth.

  • John B, London

    Thank you Ed. for the timely clarification. However, that begs the next question. What is the point? If the whole purpose of privatisation was to allow services to be run on a commercial, competitive basis, how is that achieved to any meaningful level when the DfT is lurking in the background pulling the financial strings? It seems to be to be a fig leaf allowing the government to outwardly demonstrate that services are still run by the private sector.
    [I suspect no one intended the present situation to arise, but the awkward compromise which now exists has been a consequence of Covid. The problem facing any government in favour of reprivatisation is that so many of the major firms involved have lost interest, such as National Express, Stagecoach and Virgin. It is going to be difficult to get them back.--Ed.]

  • Chris Jones-Bridger, Buckley Flintshire

    An opportune moment to reflect on the consequences of the past 30 years of privatisation as enacted by the 1993 Act. Having taken a fully integrated system the resulting fragmentation has created an unwieldy structure held together by a labyrinth of contractual arrangements each trying to earn a margin to service. Relatively short term franchises have hindered long term strategic enhancement. As an example while remarkable investment in new rolling stock has been made relying on market mechanisms with short term leases has resulted in embarrassing examples of relatively new fleets being side lined, a situation where frugal BR would have been rightly condemned. And that is not to count the ongoing extra training costs.

    We have no further to look than the Williams review to understand that the industry has been saddled with unsustainable cost maintaining this unwieldy. Structure. Ministers know this, but whereas both the nationisation & privatisation acts were expedited thought Parliament, they appear to be in denial as the reviews conclusions do not reflect their idiological world view. Policy drift until after the next General Election appears to be the order of the day. So rather than tackle the structural cost excesses marginal savings are being demanded to front line operations such as the ridiculous suggestion that on train WiFi be abandoned.

  • John B, London

    I would very much like to know what is the difference between a 'franchise contract' and a 'national rail contract'. Very little in practice I would imagine for the majority of users. Services in London, Wales and Scotland will (continue to) benefit from state involvement, whereas the remainder of the TOCs continue on the old failed model under a new name - early breaks on both sides, limited revenue/cost risk under a tightly controlled DfT budget, and fees on a performance-related level as the DfT sees it. More importantly, zero incentive or reason to innovate/improve by introducing new services etc, so very much like an 80s deregulated bus operator.
    [The difference is actually fundamental, although not perhaps from the passenger's view. A franchise is a commercial proposition. The holder agrees to pay premiums or maintain the agreed services for a subsidy, while keeping the revenue. If revenue is insufficient or costs greater than expected, the franchise risks insolvency, unless its owner can provide more capital. A number of franchises failed for this reason (GNER Mk2, Connex Southeastern, National Express East Coast, etc.). A National Rail Contract is essentially risk-free. The DfT/Treasury take the revenue and pay the bills, allowing the operator something like 1.5 per cent of turnover as a management fee.--Ed.]

  • david C smith, Bletchley

    Since 1923,we've had "the big four" grouping, from 1948,nationalised BR, then since the mid 1990's, privatisation.through franchising. In the end each failed , for their own reasons. It doesn't seem a very good notion to go back to try and resurrect any of these.

    Questions arise . Which aspects of the above seemed to be succesful ? Can we incorporate such in an overall structure ? Profit seeking operations seem to make sense, as long as stable,strong competition is feasible, such as in railfreight generally and intercity / long distance passenger . Where natural monopolies exist, we need a form of public ownership , hopefully directly answerable to the people in their geographical areas ( the City Region conurbations ). Commuter traffic mainly , but let's not forget the infrastructure, which no longer can sport many alternative lines since the second Beeching report "rationalisations".

    Many of us seem to have noted the growing control the DfT has taken over the privatisation period. Personally, I feel it best for decision making to be within the operator , with Whitehall's job being that of putting in place a stucture of incentivising subsidies and charges to represent "hidden"costs and benefits to the transport market.