Planes, Trains, and a couple of bus companies from Scotland…

Well, the Great British Public have rallied around the underdog, as per usual, this in the Great Train Sale. There have been huge outpourings of support for Virgin Trains since the news that they would not be running the services out of Euston from December, and there is even an e-petition to urge the Government to look again at the decision which is gaining a lot of support.

It’s also going to be more than a co-incidence that Virgin Atlantic have announced a move into UK domestic operations the week after the news that the WCML franchise would be going to a competitor. Even though there has been speculation that this was on the cards since BA bought UK competitor BMI, and there must have been planning going on in the background, launching when they did has maximised publicity for the new VAA operation, riding the wave of publicity around Richard Branson saying words to the effect “We probably won’t bid for another rail franchise again, unless things change”. Because it’s diversified, Virgin can afford to “walk away”, or at least appear to, and at the same time deliver a parting blow to both the DfT and the incoming WCML franchisee, First Group.

Of course, being the underdog is nothing new to Branson – think of the “Dirty Tricks” affair with BA – so he knows how to play this role pretty well, and the man in the street finds it easy to get behind Branson as being a “people’s champion” versus the dull, bland corporates.

However, what happens next? Well, unless Virgin decide to back off, accept the franchise loss, and decide to compete in the air, it’s going to cost us (and by “us”, I mean the UK taxpayer) even more money:

If the franchise is debated in Parliament as a result of the petition, it will cost the taxpayer money.

If Virgin decide to appeal the decision, and take it to a judicial review, this will cost the taxpayer money.

If the DfT make a u-turn and decide to take the franchise away from First Group, and award it to Virgin, then First will likely want a review of their own, and/or seek compensation. Who’s going to pay for that? The taxpayer. Not First shareholders, not Stagecoach shareholders (remember, they own 49% of VT), not Richard Branson, who I’m thinking was evidently right when he dismissed rail franchising as “insane”.

The whole crazy privatisation, hashed together by the bungling Major Government, of Britain’s railways has cost the taxpayer billions, and delivered minimal benefit to the passenger.

The normal rules of a deregulated market do not apply on the majority of Britain’s railways. There is often no consumer choice other than “take it or leave it” for the majority of rail journeys, as only one operator provides a service. Many attempts at competition and open access have either failed (such as Wrexham & Shropshire), have been blocked because it threatens the incumbent franchisee, or are simply non-starters because there’s insufficient capacity in the infrastructure.

If a rail operator fails, then services aren’t allowed to stop running, because that would have disastrous consequences, instead the Government step in and constitute a quango to run the service, while the private company skulks off.

A bit like bailing out the banks when they screwed up. It’s already been done with the failure of Railtrack, and with a couple of franchises.

So, instead of competition and choice, we have an expensive raft of lawyers, consultants, and contract managers that has evolved to support our dysfunctional railway franchising and track access ecosystem.

For instance, because of the punitive blame-placing system of managing delays on the modern railway, there are teams of people known as “delay attributors” who trace train delays through the system, and work out how they were initially caused. Not so that the cause is avoided in future, so the delays are reduced, but primarily so that someone is “blamed” for the delay, so a settlement plan can push “pretend money” around between Network Rail and the train operators, because at the end of the day, it all likely balances out over time, and little real money actually changes hands.

This even costs money and time at the coal face. Example: A friend who is a Guard for a national operator was harrassed by their manager as to why their train took an extra two minutes between two points on the railway that their train didn’t even stop at. Of course, they had no idea why, because the train didn’t even stop there, and they were busy checking tickets. It left the previous station on time, and the train was on time the next station. Evidently, there was some pressure from a delay attributer on these two minutes even though they had no consequence for those on board the train. How is this a good use of our money?

Of course, this never really translates to benefit for the passenger (or the freight customer) – the various bodies involved in running the trains just point fingers.

There are a number of bodies, including the Bring Back British Rail campaign, who would like to see the railways renationalised, and they may have a point.

Ironically, during the latter years of BR, some elements of the business – such as Intercity – actually delivered a significant surplus. This in turn reduced the taxpayer burden on subsidising those services which required it – the benefit of an integrated company.

There have been attempts to build franchises which use this theory, such as the single First Great Western franchise – this used to be several seperate franchises, a profitable Intercity franchise, and subsidy-dependant commuter and rural services – the idea being a franchised operator can’t just cream off the profitable stuff, and there’s a resultant overall reduction in public subsidy for the commuter and rural services, being buoyed up by revenue from the longer distance services. However, given that First Group are now exercising the break clause in the Great Western franchise, allegedly as it’s no longer viable to pay the DfT to run the franchise (due to depressed revenues due to falling commuter numbers), even this hasn’t worked out quite as planned.

We’ve also got a laughable situation where it seems that a state-owned UK company cannot theoretically bid for a railway franchise, but at the same time we’ve got the commercial/international arms of mainland European state-owned rail operators who did, and now run UK rail franchises – Arriva (who also own Chiltern) are Deutsche Bahn, Abellio (behind Greater Anglia and Northern franchises) are Nederlandse Spoorwegen, and Keolis (who are part owners of Southern, SouthEastern, and TransPennine) are actually majority owned by SNCF. Does this consititute a net flow of taxpayer subsidy out of the UK?

This was recently highlighted in the Scottish Parliament – where you consider that ScotRail is 75% publically funded through subsidy – then why was this going to a commercial for-profit operator? Why could Holyrood not incorporate a Scottish state-owned non-profit company to run the service? Apparently, there’s some red tape in the 1993 Railways Act to deal with.

So, returning back to the WCML franchise: Branson is certain the First Group bid will result in an East Coast style bail-out. Now he’s competing in the sky, that may even give this a nudge. What if others follow Branson’s lead, dismiss railfranchising as “crazy”, and no-one wants to take on the poison chalice of the ECML?

If we assume for a moment that the new WCML franchise goes bump before the DfT can re-let ECML, does the Government end up running WCML and ECML?

Is that a foundation for re-nationalisation of train operations through the back door?

2 thoughts on “Planes, Trains, and a couple of bus companies from Scotland…”

  1. While the current system is undoubtedly broken I wonder how useful it would be to radically restructure it yet again.

    It sounds like a lot of the issues arise from operators having single routes and those routes not always being profitable. If there was a single operator for all routes – or a lot of routes – the regulator could require the operator to subsidise the cost of loss-making routes with the surplus from profitable routes. Would it be possible to batch groups of routes into a single franchise and put them out to tender?

    Would anyone bid for a franchise if the net profit across all routes was relatively low?

    1. The integrated franchises, such as Great Western, which covers all services out of Paddington (apart from Heathrow Express), and includes all local services South of Worcester, down to Penzance, are an attempt to create a more rounded franchise, where there is some cross-subsidy.

      First just took the break clause on this great white hope of a sustainable franchise as the fall in passenger numbers (fewer commuters) won’t allow them to meet their own revenue targets, and in doing so won’t pay the full amount to the DfT.

      So, there’s been an attempt to do this, and it’s not survived the depression we’re currently in.

      It’s unclear if this means the DfT will have to incorporate a quango to run Great Western, or whether they will manage to refranchise it.

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