Select Committee on Transport Fourth Report

6. Franchise Issues

58. At the time of our inquiry we received considerable evidence about the performance of particular franchises. We do not wish to produce a sustained commentary on individual cases, but there are a certain number of issues we wish to draw to the House's attention.

59. The experience of Arriva Trains Northern and Arriva Trains Merseyside demonstrates the flaws of the original franchising system. The two franchises were originally held by Merseyrail Electrics and Northern Spirit; when Arriva took over the franchises the following problems were identified:

i)  the franchise had a driver shortfall of 34;

ii)  there were severe shortages of other staff, including conductors;

iii)  there was insufficient driver training resource without any systematic programme to recruit new train drivers;

iv)  the franchise had access to "insufficient rolling stock".

The contract was transferred to a cost plus basis in 2001.

60. Mr Cameron, of Arriva Trains Northern, explained that:

"When we took over the franchise in February 2000, the Strategic Rail Authority asked us to take it over on the basis of the MTL[70] contract because they were only expecting us to run that operation until the end of 2000 when the franchising programme would be complete. The Trans-Pennine Express bid would have been finalised and awarded and so would the Northern Rail franchise. When we took over, we took over with the losses we inherited from MTL and we put in a very robust recruitment and training programme once we found out the scale of the problem. The difficulty is that it takes some 15 months to recruit and train a driver, so even though we put the programme in place in April 2000, it was not going to be until July 2001 that the first driver would come out of the training programme and that is what would cause the underlying problem in September/October 2001".[71]

61. Mr Newton, Chief Operating Officer of the SRA, explained;

"It is true to say that the full range of the problems were not fully understood; I do not think they were understood by Arriva or the SRA or SSRA [the Shadow Strategic Rail Authority] as we were at the time. I think the priority in that situation was that we were faced with the imminent financial collapse of the existing franchisee and it was fortunate, in that context, that Arriva were able to move in and take over at relatively short notice but also maintain the then current funding level for at least a 12 month period. At the time, the prospect was that that 12 month period would be sufficient for us to put in place a revised alternative franchise as a policy developed in the concept of Trans Pennine and Northern separate franchises, but that did not materialise and I think it was over that period that Arriva really started to address [them]".[72]

62. He was entirely clear that:

"Because the original policy which surrounded the original franchises was very much an arm's length policy, to place a contract or place a franchise at minimum cost and to stand back to a great extent and leave the franchisee to deliver the service. The situation when Arriva took over was that the key objective was to actually rescue the franchise from imminent financial collapse. It was an acquisition by Arriva of MTL and part of that process was their due diligence of the business they bought. It was not only Northern Spirit, it was Merseyrail and also Bus Businesses".[73]

63. We were concerned that Arriva did not appear to have conducted adequate due diligence checks on the franchises it took over. It is extremely troubling that these discoveries were not made until April 2000. The difficulties led to appalling passenger services, with trains delayed or cancelled.

64. Eventually, Arriva decided on drastic action and in October 2001 reduced rail services, and substituted some with buses. Very little notice was given of these changes, which were announced on a Friday and implemented the following Monday. Professor May of the Institute for Transport Studies at the University of Leeds, described the effects:

"The overall reduction, for services from my local station, Thirsk, was just under 40% on a service which was previously only hourly. Key commuting services to Darlington and Newcastle, and to and from York and homebound from Leeds were withdrawn. The only alternative for commuting journeys to Newcastle was a bus with a three minute connection at Darlington. As a result some commuters from Thirsk were forced to change jobs. Many more will have had to switch to car use, and many will not have returned to the trains since".[74]

65. Mr Cameron defended Arriva's actions, saying "We had to do something when we were 165 drivers short, which was the worst position that we faced in early October".[75] He also claimed that announcements of timetable changes were delayed for over a month by the need to agree them with PTEs and the SRA. Professor May noted that although Arriva did stop a through service at Thirsk, the service stopped "did not appear in the timetable, and they claimed negotiations with Railtrack had delayed its announcement".[76]

66. It is entirely unacceptable that passengers should have been given a weekend's notice of passenger service changes which had been foreseen for over a month. It is irresponsible to hope the industry will muddle through severe shortages of skilled staff. If a Train Operating Company ever again considers it is necessary to take drastic action to stabilise services, all other parties should engage urgently. There should be clear and adequate notice of planned changes, and the quality of replacement services should be monitored. This will require that the TOC, Network Rail, the SRA and, in some cases, local authorities and passenger committees, work together. If the service to passengers can be improved by requiring changes to services which are not directly affected, this should be a requirement. Planning for these service changes should begin by assessing the needs of the passenger, and attempting to meet these needs, rather than by considering the interests of franchise holders or the SRA itself, encouraging new routes to Manchester offered by Midland Mainline.

67. In March 2002, the SRA confirmed that Arriva would be fined £2 million and required to recruit and train new drivers. The company would face additional fines if it failed to do so. We welcome the fact that the SRA required that the drivers be newly trained, and not recruited from other operators.[77]

68. It would be unfair, however, not to acknowledge that all parties are working together to address the skills shortages which underlay the failure of services experienced by customers of Arriva Trains Northern. Arriva themselves invested heavily in the training of new drivers and in an improved customer helpline service. The PTEs and the SRA are working to implement a "framework for skills in the Rail Industry", to help support the industry in developing the trained workforce it requires. We welcome the Government's lead in establishing a framework of skills for the rail industry; the industry itself must now take responsibility for ensuring it has the trained workforce it needs.

Operation Princess

69. In September 2002 Virgin Cross Country launched a new timetable in "Operation Princess". Although it extended beyond the North, Virgin told the Sub-committee:

"The entire CrossCountry timetable is to be re-written on 30 September to create the new regional network in which train services frequencies will almost double overnight and many journeys accelerated. The new CrossCountry timetable is code-named Operation Princess and represents one of the biggest national timetable changes in the last 30 years. The North East will be one of the main beneficiaries of the upgrading with a doubling of train frequencies throughout the region as follows:
CrossCountry trains: daily to/from Now30 September 2002
Berwick6 32
Newcastle/Durham/Darlington 2764
York28 64
Leeds21 33
Doncaster11 30
Sheffield32 65

The new service will give the North East two core CrossCountry links across the UK: a) an hourly Edinburgh-York-Leeds-Birmingham-South West service; and b) an hourly Newcastle-York-Doncaster-Birmingham-South Coast service. Trains will be routed alternatively via Leeds and Doncaster to provide each with an hourly CrossCountry service and more connections into local train service networks (40% of CrossCountry passengers use another train company). The new services also create a new two-hourly direct service link between the North East and South Wales."[78]

70. Services would also be improved in the Northwest:

"A rather ragged CrossCountry service pattern will be replaced with a new hourly service to Carlisle/Scotland and Birmingham/Reading. There will also be new two-hourly service from Manchester to Scotland, from Blackpool to Birmingham and from Liverpool to Birmingham. Operation Princess will renew the entire CrossCountry train fleet with Voyagers/Super Voyagers from 30 September 2002 in the North West, and will bring major timetable benefits in both service frequency and journey times:
CrossCountry trains: daily to/from Now30 September 2002
Manchester-Birmingham38 50
Warrington-Birmingham-South 1532
Liverpool-Birmingham-South 1018
Blackpool-Birmingham-South 314
Preston-Birmingham-South West 2248
Birmingham-Scotland29 55

71. Operation Princess has not gone as smoothly as planned. In the first place, there has not been the capacity on the Network to accommodate all these service increases. By February 2003 the SRA was announcing thinning some services to increase network reliability.

72. Secondly, Virgin replaced old trains with new Voyager trains which, Virgin told us:

"...offer a vastly improved travel experience with an on-board shop, and club class area with an at-seat service, electronic information systems and audio entertainment at every seat. The Voyager/Super Voyager fleets are amongst the first in the UK to fully comply with the European legislation for disabled access".[79]

73. The new trains, although more frequent than those they replaced, were smaller. It was not long before there were widespread complaints about their overcrowding. When he appeared before us in another inquiry, Mr Green explained:

"The underlying cause of the overcrowding was a massive growth in short term travel on the route which we designed as a long-distance route.... We have learnt some tough lessons on overcrowding, particularly overcrowding on a congested railway. I think we have also demonstrated that introducing a fast, frequent service of new trains does attract a lot of new passengers, so the challenge is how to maintain this upward trend at a slower growth rate so we have time to match demand with capacity".[80]

74. There are several lessons to be drawn from this episode:

a)  the SRA needs to take a much clearer view of the network capacity before approving timetable changes.

b)  when high quality, frequent, trains are provided overall passenger use grows. This suggests that there may be ways to cut subsidies while improving the service.

c)  the increased demand is for regular short to medium journeys, rather than long distance ones. The Government's target for increasing passenger kilometerage must not be an excuse to provide a service which does not meet customer needs.

75. Given this history, it is entirely understandable that the SRA has adopted a new franchising policy, which allows it to impose far more detailed controls over operating companies. However, the SRA has itself compounded the difficulties by failure to make clear plans and to keep them. Refranchising was expected in 2001. In 2002, when we took our evidence, it was expected that the Transpennine and Northern Franchises would be created by 2003.[81] Since then the SRA has reached agreements with Arriva Trains Northern to operate services on the Transpennine Express services until late 2003 and the Northern Rail services until summer 2004. The franchises are now expected to last for eight to ten years, rather than the fifteen years envisaged by Mr Steer of the SRA in June 2002. We note that although in November 2002 the SRA thought it would announce the preferred bidder for the Transpennine Express "early in the New Year"[82] there had been no announcement by the time this report was agreed on June 11 2003.

76. We understand that letting franchises can be a lengthy business, and that timetables may not be precise. It is better to change a bad policy than to keep it simply to avoid disruption. However, the SRA has spent two years longer than originally envisaged to let these franchises, and the process is still incomplete. The SRA, quite rightly, wishes the industry to have clear targets, and to be penalised for failing to meet those targets. It must set an example by itself being clear about its own processes, and performing the tasks it sets itself in the timescales it predicts.

70   Mersey Travel Limited Back

71   Q 5 Back

72   Q 267 Back

73   Q 271 Back

74   Ev 91. Back

75   Q 35. Back

76   Ev 91. Back

77   SRA news release, 25 March 2002. Back

78   Ev 158. Back

79   Ev 159. Back

80   Overcrowding on Public Transport Q 137. Back

81   SRA Strategic Plan, January 2002, p93. Back

82   SRA Press Notice, February 3, 2003. Back

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