Rail Partners: inflexible contracts deny revenue opportunities

Train operators must be given greater freedoms to attract customers back and help the network return to growth.

That’s the message from Rail Partners, which represents passenger and freight operators. It argues that £1.6 billion to £2.1bn worth of revenue will potentially be missed over the next two years, because of inflexible contractual arrangements with operators that are “no longer appropriate” postpandemic.

It says the increased revenue would allow the Government to release more taxpayers’ money to be used on priorities such as NHS backlogs, rather than funding the railway.

“The gap in rail finances cannot be closed by cost savings alone. A sole focus on reducing costs risks a spiral of decline, with cuts to services putting passengers off, leading to further cost pressures and cuts,” warned Rail Partners CEO Andy Bagnall.

Its report by independent economic analyst Oxera, Fork in the Tracks: Attracting customers back to the railway, says the industry faces a hole in its finances with taxpayers contributing around £2bn more annually than before the pandemic.

The report sets out four measures, within the framework of the Government’s Plan for Rail, to create flexibility in current National Rail Contracts (NRCs) and ultimately the new Passenger Service Contracts (PSCs):

■ Activate mechanisms in NRCs that facilitate operators to invest and innovate to accelerate revenue growth for the financial year 2023-24.

■ Provide operators with sufficient influence over commercial levers, such as timetabling, marketing and fares, to respond to new incentives and improve the passenger offer.

■ Evolve mechanisms for PSCs in keeping with the Plan for Rail’s ambition of creating a spectrum of contracts with calibrated revenue incentives - ensuring future contracts are fit for purpose, for different markets.

■ Reunite cost and revenue in the Department for Transport to avoid a sole focus on cost reduction that is having a negative impact on the customer experience and revenue generation.

“The railway finds itself at a fork in the tracks - facing one of its most significant points of inflection since privatisation. It faces a fundamental question of how best to avoid decline and accelerate recovery,” says the report.

“Delays to wider reform and legislation, as well as a backdrop of industrial action, compound these questions.

“If we get it wrong, the railway faces a protracted hiatus, a stunted recovery from the pandemic, and most likely a permanently smaller railway.”

Rail Partners added: “If we get it right, the railway can return to growth and help the country do the same, with rail acting as a catalyst for economic growth and decarbonisation.”