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ABELLIO’S contract to operate the ScotRail franchise will not be extended or retendered and thus will end on March 31, 2022.
At present, services are being provided under the terms of an Emergency Measures Agreement (EMA), which has been extended to September 2021. These arrangements allow
Abellio to be reimbursed for the cost of operating the train service specified by Transport Scotland plus a small profit margin included to meet corporate overhead expenses.
If actions follow the precedent set by Welsh Ministers for rail services in Wales, ScotRail will become a company owned by Transport Scotland under the procedures that allow an operator of last resort (OLR) to be appointed with responsibility to run the timetable.
The Caledonian Sleeper franchise is not included in the Scottish Government takeover, and so for the moment will continue to operate under the EMA procedures.
As well as ScotRail and Transport for Wales services, an OLR is currently being used for LNER’s East Coast operations as well as routes within the former Northern franchise run by Arriva.
SHORT TERM INTENTION
The legal power to appoint an OLR was originally provided in case a franchise ended at short notice, allowing time for a competition to be held to identify a new franchise holder. This is what happened when the Connex South Eastern contract was terminated in 2003 on the grounds of financial mismanagement, with Govia subsequently being appointed to run the Integrated Kent franchise that included the South Eastern area and HS1 domestic services.
The next example occurred when National Express Group defaulted on its InterCity East Coast contract in
2009 as it was unable to meet the promised premium payments, and an OLR company was created that branded the services as East Coast. As economic conditions improved after the 2008 banking crisis, the Department for Transport tendered a replacement franchise, which was secured by Virgin Trains East Coast. However, this again turned out to be an unaffordable bid leading to another default, so another OLR (trading today as LNER) had to be created. This time there has been no move to retender the East Coast contract, and the OLR contract has been extended through to 2025.
For Northern, the franchise holder Arriva Rail North was not able to deliver the promised improvements to services – in part due to the late delivery of new rolling stock – but, in the face of continued disruption, the DfT decided it would terminate the franchise at the end of February 2020. This resulted in operations being transferred to another Government-owned OLR trading as Northern Trains Ltd. No early retendering is proposed, with the current arrangements likely to continue until 2027.
FUTURE UNKNOWN
The consequences of non-essential travel being restricted due to Covid has meant that none of the existing franchise contracts are viable, and the train operators that were deemed to have been meeting their contract terms before the restrictions are currently operating under the terms of Emergency Recovery Measures Agreements, which are an updated form of the original EMAs.
Although it has been stated that the franchising system will be replaced, it is not yet clear how this will take place, as the legality of using OLR companies without the intention to relet franchises is questionable.
The Government has again delayed publication of the 2018 Williams Review as it is reported that HM Treasury has objected to the Government taking on the revenue risk from the private operators.
It was never the intention at the time of Privatisation that franchises would continue forever, and it was thought they would be supplemented in time by independent operators providing open access services. The reluctance of successive Governments to follow this policy could be said to have resulted in an unhealthy monopolistic position – particularly on main line routes, which encouraged franchise bidders to overvalue the contracts.
The passenger situation is unlike the freight sector, where early domination of the market by EWS and Freightliner has long gone, with a number of successful new freight operating companies creating a competitive market that has seen costs reduced and new traffic flows gained to rail.
It was never the intention at the time of Privatisation that franchises would continue forever