Christian Wolmar
The tensions of franchising.
THINGS are too busy and exciting in the rail industry to spend the whole of this column looking back, but it is certainly a worthwhile exercise. History may never quite repeat itself, but there are always lessons to be learnt, and a look at franchising is rather timely given recent events.
My first article for RAIL was in issue 262, which means this is my 638th column, as I’ve never missed an issue, and all of them since
RAIL 385 are on my website. Do have a browse, it is rather fun and you will be able to see how my predictions have borne the test of time.
Amazingly, the inaugural column, when I was billed as ‘Wolmar of The Independent’ since I worked for that sadly defunct (though still online) newspaper at the time, contains the following words: “This first column must, I’m afraid, cover rail privatisation. I promise to cover other aspects of the railways in future columns...”
That was, to say the least, slightly naive. There has been, in fact, barely a column since whose content was not influenced in some way or another by rail privatisation.
Rather more interestingly, the column states that after various conversations with the key players, Roger Salmon (the initial head of the defunct franchising organisation), John Swift (the rail regulator), government ministers and franchise bidders: “None has managed to explain why this particular financing structure for the ‘new railway’ is the optimal solution.”
That was indeed prescient, and one could say it was the basis for what later became the Wolmar question – what is franchising for? – which has never been answered.
The first mention of this seems to have been in RAIL 449, which was published in November 2002, but the idea of asking that question stretches even further back.
And now we are turning full circle. It is rather apt that I am writing for this memorable issue - 900 - just as a second franchise, Northern, has been taken over by the operator of last resort for the government. This is creeping renationalisation by any other name, and it is beyond ironic that it is being carried out by a government that is ideologically committed to private enterprise.
It is even stranger that the present Transport Secretary seems more ready to take over these franchises than Labour’s last post-holder, Andrew Adonis, was when he took over the East Coast franchise rather reluctantly in 2009, though he does seem to have changed his mind since then and embraced state ownership.
Therefore franchising seems about to be laid to rest, but its death throes have been lengthy as no one dares pull the plug on the patient’s life support system. Indeed, Keith Williams (remember him? The guy who was supposed to do a quick and dirty review of the structure of the railways) gave the George Bradshaw lecture a year ago – yes, a year ago on February 26 2019 – saying franchising was dead, long live... I’m not quite sure.
Having followed this saga for nigh on a quarter of a century, I am intrigued by the change in the Zeitgeist. For so long, I was whistling in the dark. I was told the franchising system was working, just look at the passenger numbers, the new trains, the extra services and the happy customers.
I kept on writing that little of this had to do with the system but, instead, was a product of external factors, ranging from high London employment and an increase in student numbers to congestion on the roads and public investment in improvements.
There were perennial crises, which reinforced my point. Several of the early franchises collapsed, leading to takeovers and consolidation: remember MTL and Prism, for example? There were various other crises and changes in policy. There was an attempt to have much longer franchises, but Chiltern ended up as the sole long-term beneficiary because of the difficulties of signing off contracts in the face of all kinds of unpredictable events.
Then there were attempts to mitigate the risk of franchises through cap and collar arrangements, but these at times had perverse results, like disincentivising attempts to attract extra passengers, while encouraging cost cutting, which merely made services worse.
Then there was the scandal, for there is no other term to describe the Department for Transport taking such a dislike to Virgin that it awarded the contract for the West Coast to FirstGroup, which was unworkable and not properly measured against its rival.
More recently, we have had the timetable chaos in May 2018, caused by a failure to
reconcile the proposed timetables of the operators against the reality of the capacity of the railway. You could not make it up. And then making sure Virgin/Stagecoach was killed off by making unmeetable demands over future pension payment requirements.
Despite all this, it’s extraordinary that Williams so conclusively decided that franchising was dead, demonstrating just how far the tide has turned. Williams, in his lecture, found three aspects of the railway were preventing improvements: “Fragmentation and short-termism; lack of accountability, flexibility and joined-up thinking; and conflicting interests within the structure of the railway.”
He argued: “With this growth [in passenger numbers] the needs of passengers have changed, whilst many of the basic elements of our rail system serving those needs has not kept pace. Too often the current system incentivises short term behaviours and inhibits reform.”
To which I say: “T’was ever thus”. Much as
I am delighted to see the franchising system go, as largely predicted when we finally get the White Paper based on the Williams Review, I do not really understand what has changed.
The franchising system always had contradictions and its very structure was beset with questions that were impossible to resolve, such as the length (long was too risky, short gave no stability), risk (the railway cannot close down so impossible to pass on real risk), money (how do you incentivise to provide a better service yet maximise shareholders’ revenue?), cost (all those bean counters allocating delay minutes and those lawyers drawing up and policing massive contracts) and complexity (who is responsible for what?).
Frankly, I don’t see why increased passenger numbers, which Williams alluded to, is responsible for any great change.
The system was, as I suggested in my first ever column, fundamentally flawed and has remained so for the past quarter of a century. It is those contradictions that have led to the perennial crises.
The franchising system turned into a massive contracting industry. The best reflection of its failure is the fact that the initial 25 franchises were let within the space of just over a year by Salmon’s Office of Passenger Rail Franchising (OPRAF).
Now, the Department for Transport, which has brought the franchising process in-house, cannot cope with more than three franchise lettings per year and has struggled to manage even that number.
This is an illustration not just of bureaucratic incompetence, but also of how the system has morphed from a relatively simple straightforward process into massive and ultimately unsustainable complexity. So, by the time we reach RAIL 1000, I am convinced that the present system of franchising will be as much part of history as Railtrack and the Strategic Rail Authority. What will replace it remains a subject for debate.