Er tight Department control
renegotiated every year as the situation on the railway changes.
Therefore, when first signed, there will (as now) still be no revenue risk to the operators, since no one has any idea of how many people are likely to use the railways once lockdown restrictions are eased. In effect, they will start out as management contracts with companies receiving a set fee to run the operations, perhaps with a small incentive to be efficient.
As the situation becomes clearer, incentives will be built into the contracts and at least some of the revenue risk may be passed on. However, whether or not any private company will be willing to accept that risk is highly dubious, given there is undoubtedly a risk of another pandemic.
The contracts will require operators to run a reliable performance, to improve customer service and to focus on community involvement, ensuring that local people and organisations have an input on the type of service being offered. They will be expected to innovate on matters such as fares, passenger information and the provision of information. And they will be required to react to changing circumstances with a flexibility that did not exist in the previous system, because the annual reviews will hold them to account.
The Wolmar question of ‘what is franchising for?’ is therefore not as dead as many had hoped. It remains pertinent because it is only worth bringing in the private sector if it is able to deploy its claimed advantages such as marketing and efficiency.
However, the tight oversight of the new agreements will leave little leeway for the private sector to innovate. And since train operators contribute very little investment, there seems little point in retaining their involvement.
There is, indeed, a question mark over whether the private companies, which have previously made a healthy profit from the franchising contracts, will be happy with complicated contracts that involve almost constant renegotiation.
On the other side, the Department for Transport does not have the skill set or the personnel to carry out such continuous monitoring.
Transport for London, which has been particularly good at overseeing this type of management contract for its growing Overground service, has only been successful because it has had both experience (by paying those procuring the service at market rate) and a decent level of resources.
This new model will require similar procurement expertise - and clearly that cannot be undertaken by the Department itself. Everyone in the industry, and indeed in the Department, recognises that running the rail industry from Great Minster House is a terrible idea.
There is another flaw in this model. While it is laudable to make operators more customerfocused and to encourage them to innovate, improvements are bound to cost money and the Treasury will simply refuse to allow the spending.
As one rail manager put it to me: “It was this type of arrangement and penny-pinching which led to the awful Thameslink coaches and the uncomfortable Azuma trains.”
The only way forward is to create a strong strategic body with a measure of independence on its budget that would allow it to improve services and make investment decisions. British Rail in its final few years would be a good model, but sadly one that is unlikely to be followed.
This hybrid status could result in the worst of all worlds. It is a compromise between the Government’s ideological commitment to the private sector and the harsh reality of the fragility of the railway which has been revealed by the pandemic.