Steve Chambers Blog

Rail franchising is over

What will emerge in response to COVID-19 is still uncertain and up for grabs

Steve Chambers

Steve Chambers

3 June 2020

Rail franchising in Great Britain ended on 23rd March 2020 when Grant Shapps confirmed that the train operating company franchises would become direct management contracts. Although a response to a crisis, we have been moving towards this moment for some time and we are highly unlikely to go back.

Back in 1996 franchising was a radical departure from what had gone before it. After incremental reform over the years and through successive governments it has become unrecognisable from the original plan. Now it is certain to change further. But change is far more likely to be led by circumstances rather than a new radical and rational settlement, as was assumed would happen after the Williams Rail Review. What is decided in crisis could leave a long legacy.

The introduction of rail franchising was a relatively rare thing in British politics, a radical policy change, deliberated over time, and a significant departure from what had gone before. When it comes to policy, the United Kingdom is more used to disjointed incremental policy changes. Muddling through, as it is also known, is what has characterised rail policy for the last few years. Tinkering with franchise lengths, network geographies and other technicalities. Although you could argue that is exactly how it was intended to operate.

I once heard a spirited defence of franchising from a senior civil servant. It went something along the lines of how the rail industry is lucky to have built into the system the regular thorough reassessment of customer need, the opportunity to specify a new standard of service and put these out to tender. Although I have some sympathy for this view, I do wonder if there is another way to replicate these benefits of innovation in a business model that does not require, for example, the name and branding of train services to be changed every couple of years for no good reason.

Recently the Department for Transport seems to have fallen out of love with the franchising tendering process, instead we’ve seen direct awards to existing operators such as Southeastern and franchises such as Northern Trains taken back in house.

The COVID-19 crisis has forced the issue of reform. With significantly reduced passenger numbers combined with the need to keep the network running for keyworkers the franchising model no longer works. On 23rd March 2020 the franchises became direct management contracts with the revenue risks taken over by the state. In theory things will return to the status quo antebellum at a future date, but the idea of anything going back to normal is far from certain.

Judging from what has gone before we are very likely to see further muddling through in rail policy. If we are not careful this could become the new settlement. But it will have been devised away from the light of scrutiny and negotiation and instead made in the heat of crisis. What should a new system, devised at a difficult time, look like?

There are three things the Department for Transport can do to get through the crisis and come out the other end with a better system than before. They are devolving decision making to empower city regions, moving to a concession model of operation and fixing some of the worst problems of franchising.

Rail policy decision making is currently heavily centralised in the Department for Transport, right down to the type of padding on train seats. In order to release central capacity, the first change should be to devolve decision making for commuter networks to cities and regions. There is the not insignificant matter of rail geography and administrative geography rarely being aligned, but this can be fixed with a pragmatic approach to devolution. The model to do this on is already there in the successful concession model of London Overground.

The crisis robs us of the opportunity to have another radical reform of rail operation. The 1996 reform was years in the making with significant precursor changes happening under British Rail. This is not possible in the current circumstances as we have the pressing matter of operations needing to be put on a sustainable footing. The opportunity is there to convert the management contracts into concession model operations. There could be some quick and popular wins for passengers if this approach was followed.

The mess that has been made of smartcard ticketing could be corrected in an instant. The variously branded smartcards of each operator could be replaced with a single smartcard. They all use the same underlying ITSO technology, but journeys between franchise areas are often not permitted. On some networks only certain tickets are available and not the full range. One of the great legacies of the post-British Rail system was the continuation of an all-network integrated ticketing system into the privatisation era. But when smartcards were introduced this principle was broken. It is a failure of franchising and could be fixed immediately.

Which brings us on to the other review that has been sitting on a shelf in the DfT, the review of ticketing. This is a complex issue and worthy of separate dissection. But the opportunity now exists to impose a new settlement on operators. Grant Shapps should not shy away from this. One way to reduce his burden would be to give cities and regions control over fares policies in their areas, retaining only long distance and intercity. This would be consistent with devolving strategic rail governance.

With a recession on the horizon we now face the prospect of passenger numbers taking years to return to pre-crisis levels. It is too early to tell if we’ll see shifts to working from home and reduced all-week commuting. The end of franchising shows us that private operators are not prepared or able to absorb the risk of the unexpected. We now have the need and the opportunity to recast the system anew, decentralising governance where appropriate, fixing some of the worst problems of franchising, and retaining a role for private operators at least for now.

Change is likely to be of the muddling through kind rather than the radical and we should ensure it happens in the light of scrutiny for the benefit of passengers.

This piece originally appeared in the May 2020 issue of Rail Professional.

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