Select Committee on Transport Minutes of Evidence


Memorandum submitted by Mr Simon Norton

  1.  Introduction: The primary question before this Inquiry is whether the passenger rail franchise system is working satisfactorily. My view is that it has been a disaster and should be drastically overhauled or abolished as soon as possible. I will be explaining my reasons for this conclusion below, and will follow with a list of recommendations.

  2.  The first question we are invited to address is what the purpose of franchising should be. Personally, I am at a loss to find any worthwhile purpose whose achievement can be seen as remotely plausible. But if pressed I could come up with three possible purposes:

    (a)  To secure private finance to improve the rail system.

    (b)  To dissociate the government from political pressures associated with the running of the rail system.

    (c)  To protect the road lobby against environmental pressures by entangling the rail system in such a network of bureaucracy that large scale improvements become impossible.

  The first, if achieved, would be a benefit to the public; the second, to the Government; and the third, to the road lobby.

  3.  The next question is whether the current system is achieving these aims.

  For (a), the answer is an undoubted "no". To the best of my knowledge, only one significant improvement to the national rail network has been secured through private investment—the doubling of the track between Princes Risborough and Aynho Junction on the former Great Western route between London and Birmingham now used by Chiltern Railways. Any consequent savings to the public sector will have been offset many times over by cost escalations in publicly financed rail projects which can be at least partly blamed on the fragmentation caused by privatisation and franchising.

  At various times, there have been suggestions that other urgently needed rail links could be financed privately: Tunbridge Wells-Lewes via Uckfield, Derby-Manchester via Matlock and Buxton, the Woodhead route between Manchester and Sheffield via Hadfield and Penistone. None of these have come anywhere near fruition.

  There's also the Central Railway project, mainly oriented towards freight but with potential to provide worthwhile passenger improvements (including the reopening of the Woodhead route referred to above), where the Government actively spurned the offer of private capital for a project which, if it worked properly, could remove a high proportion of lorries from some of our most congested motorways.

  There is another way in which private money can finance rail development, and it is one that has been neglected by the Government: planning conditions. For example, agreement to Heathrow Terminal 5 could have been made conditional on BAA's financing integrated transport—both road and rail—for a wide area round Heathrow, including contributions to projects such as Central Railway and Crossrail, and the opening up of its Heathrow Express/Connect services to the non expense account public which would alleviate overcrowding on the Piccadilly Line which affects both budget airport travellers and local residents. As another example, the vast development planned for the Oxford-Cambridge arc could easily finance the restoration of the rail link between these cities.

  For (b), the answer is again "no". This was apparent even before mismanagement by Railtrack induced the Government to effectively renationalise it: there was always bound to be a need to take public interest criteria into account when regulating the industry. Now the Government is involved not only in regulation but also in assigning both capital and revenue finance to mainatin and develop the system, and this is bound to lead to political arguments.

  However, for (c), if indeed this was one of the intentions which led to privatisation and franchising, the answer is "yes". The Blair Government came to power with the famous promise by Mr Prescott that if traffic levels hadn't started to fall by the end of the Government's first term of office, he would have failed. Well, he did fail.

  Why did this happen? A contributory reason is surely that the burden of fragmentation has made it impossible for the rail industry to take much of the traffic that could theoretically be transferred from the roads—both passenger and freight. Some possible contributory reasons for this:

    (a)  The need for multilateral legal agreements between all the parties involved in the fragmented industry has pushed up project costs.

    (b)  The lack of a unified project developer analogous to the Highways Agency has drastically weakened the bargaining position of those seeking to pursue major rail development proposals.

    (c)  The need to compensate train operators for the engineering possessions required to implement improvement projects is another factor that has pushed costs up.

    (d)  For those projects that are publicly financed, the financial assessment is considerably weakened because the revenue from the increased patronage which can be expected on the completion of a major improvement scheme goes to the train operator rather than the public sector.

    (e)  The disablement of the rail network following the Hatfield crash—which killed fewer people than die on the roads in an average day—fundamentally undermined the credibility of rail as a provider of a reliable service.

  This will lead to the following recommendations:

    (a)  Reintegrate the industry.

    (b)  Set up a rail analogue of the Highways Agency, with its own funds which can be used to pursue major development projects. Alternatively, expand the remit of the Highways Agency to cover rail development—and change its name and orientation so that it is no longer either in name or in fact a road development organisation.

    (c)  Prioritise schemes for reopening old lines or building new ones. As they don't impinge on existing track (except for the short period required to join the new line up to the existing network) there will be far less need for track possessions.

    (d)  Fares revenue should accrue to a public sector organisation. If the task of running services is delegated to the private sector then they should do so on an agency basis. (This would bring other advantages that we will come to later.)

    (e)  Expand the safety responsibilities of the rail industry to include the reduction of road danger by capturing traffic that would otherwise go by road.

  4.  I now skip to the question of whether risks are suitably apportioned between the Government and franchise holders, which will raise some points relevant to (d) above.

  I believe that almost all the financial risk of a franchise should accrue to the public sector. Franchisees should get a bonus if they perform well, but that's all. This would bring the following advantages:

    (a)  Franchisees would no longer have to be compensated—ultimately at public expense—for track possessions etc.

    (b)  The financial assessment of rail development projects paid for by the public sector would improve. (This is the point made in (d) above.) In theory, a partnership agreement could be used to capture the benefit to a train operator from measures that would increase patronage, and this is in fact one of the proposals I made in my response to this Committee's fares inquiry, but this is a cumbersome way of doing things.

    (c)  The financial assessment of road development projects which might take existing or prospective traffic off the railways would become less attractive. In other words, there would be less call for schemes which degrade our local and global environment by putting more of our countryside under concrete and increasing traffic and greenhouse gas emissions there from.

    (d)  It would be easier to design a fares system that could be seen as fair, without the distortion resulting from differing policies between train operators. Some of the anomalies can be seen in Barry Doe's evidence to the fares inquiry referred to above.

  5.  Let me now go through those other questions for which I feel I have something to say.

  What input do operators, passengers and other interested parties have into the design of franchised services? As far as passengers are concerned, not enough. There is also the problem that with franchise agreements "set in stone" it may be hard for passenger groups to campaign for the improvements they want while a franchise is in progress. This is of particular concern when there is a "window of opportunity" for a certain improvement, eg a new station to serve a particular development proposal, especially if it is to be enshrined in a planning condition imposed on the developer.

  Are franchise contracts the right size, type and length? No, as suggested above they should be agency agreement with the fare revenue accruing to the public sector. As for their length, longer contracts may have their advantage in facilitating investment, but they also exacerbate the "set in stone" factor referred to above. If operators are to assume the financial risks from investment, there should be some way in which benefits that continue beyond their franchise term can be credited to them.

  What criteria and processes and used to evaluate franchise bids? At one time we hoped that the prospect of development projects would be taken into account. The loss of the Southern contract by Connex, even though they had promised if the contract was re-awarded to reopen the line between Uckfield and Lewes, put paid to that hope.

  Do we need more competition and vertical integration? I'm not sure of the relevance of competition, but vertical integration is harder to achieve than might be thought, because track is shared between different franchises. At one stage the idea went round that there should be a single franchise for each London terminus (as has been implemented at Liverpool Street and Paddington), but this leads to the question of why London? If every station, or even every principal station, was to have a single franchisee covering all services, we wouldn't be far off having a single franchisee covering the whole rail network.

  Is franchising compatible with open access operations? I don't see why not. The regulatory authority must retain discretion to reject an open access bid that sabotages the franchised network.

  Should train, rolling stock and track operation be more closely integrated? I don't know, but the oligopoly situation of rolling stock companies is a severe brake on the ability of rail to increase its capacity. As I recommended in my response to the fares inquiry, what we need is an integrated system where train operators are provided with extra coaches which they use to increase their modal share; they reduce their fares to ensure that the extra capacity is used; and this replaces road widening as a mechanism for dealing with road congestion.

  6. The effects of fragmentation on passengers. This doesn't seem to have been covered in the list of questions, but I think it is important, and wish to outline some of my personal experiences to illustrate why.

    A: On one occasion I did a day trip from Cambridge to the Peak District, leaving my home before 06.00. On the return leg, I used the Central Trains Nottingham-Norwich train which is scheduled to arrive Ely at 22.08, and there I would connect into a WAGN train originating in Kings Lynn and due to leave Ely at 22.20, to reach Cambridge.

    Unfortunately the Central train was running late. By the time it was en route to Ely it was about 11 minutes late. Just before Ely North Junction it was stopped by signals, presumably to let through the WAGN train which was due at that time. We did in fact reach Ely before 22.21, but the station management refused to hold the connection. As a result I (and several other passengers) had to wait nearly an hour for the next train. I missed the last bus from Cambridge station to my home, and had to walk two miles, while in a desperately tired state as a result of my early start.

    Whom should I complain to? Central Trains, who ran the late running train; WAGN, who ran the train that wouldn't wait even a minute to connect; or One, who manage the station where the connection should have taken place? The fact that all three were subsidiaries of the National Express Group doesn't make them accountable for one another. I put the blame squarely on One. They told me they had a strict policy of letting connections go. Who was responsible for designing such a lunatic policy? I was unable to find out. They did say that holding connections might have knock on effects further along the system, but I can testify that there was neither train nor bus leaving Cambridge at around the time my connection would have arrived whose connection off that train could possibly have been jeopardised.

    B: I make occasional visits to Shropshire. One of the routes I used most frequently was the X5 bus from Cambridge to Milton Keynes where I bought a good value "Central/Silverlink" Saver (or even day return) ticket. At one stage, however, the Birmingham-Shrewsbury service was split between Central Trains and Wales and Borders, both of which continued to be National Express Group subsidiaries. After a period of frustration from having to wait at Birmingham or elsewhere for a train run by the right operator, I asked why Wales & Borders was excluded from the system. This complaint dingdonged between the three operators and the Rail Passengers Committee for over a year, after which I eventually was told that the anomaly had been overlooked when Wales and Borders was hived off, but that due to the impending takeover of this franchise by Arriva (as Arriva Trains Wales) no action would be taken. Shortly afterwards, the fare was withdrawn anyway, and the journey made more difficult by imposing an extra change at Northampton and reducing the service between there and Birmingham.

    C: A few years ago Central Trains introduced a special ticket called a Shirerider. This is an add on to any rail ticket which allows unlimited bus travel on a Sunday on a widespread network of bus routes in an area including most of Worcestershire, Herefordshire and Shropshire.

  The problem was, and probably is, that nobody seems to know how to issue Shireriders. On one occasion I turned up at Paddington for the 08.03 train to Worcester run by Thames Trains. Their own ticket office was closed so I went to that of First Great Western, who as I said didn't know how to issue a Shirerider. So I had to keep all by bus tickets for that day and send them off for a refund. Now whom should I send them to—First, who ran the ticket office, Thames, who ran the trains I used, or Central who sponsored the offer? Again, my complaint dingdonged between the three operators and RPC. This time I did eventually get a refund from First.

  7.  Summary of recommendations. (Note: most but not all of these are covered in the foregoing.)

    (i)  Action should be taken as soon as possible to return the financial risk and rewards from passenger train revenue to the public sector. This could be done by changing the basis of franchises when they expire, by agreement with existing franchisees, or by buying them out. A public debate should take place into what sort of fare system would bring the greatest benefit to rail and road travellers. Assessment of rail and road projects should reflect the benefit or disbenefit to the public if they attract or abstract passengers to/from rail.

    (ii)  An inquiry should be launched into the reasons behind the cost escalation of projects involving the rail industry. Depending on the conclusions, appropriate action should be taken.

    (iii)  Priority should be given to projects whose implementation would minimise the disruption to existing train services, such as line reopenings.

    (iv)  If franchisees are expected to invest, provision should be made to credit them with at least a share in the benefits from such investment after the expiry of their term.

    (v)  Either a rail equivalent of the Highways Agency should be set up, and provided with finance to develop major projects; or the remit of the Highways Agency should be extended to include rail development, again with funding provided. In the latter case, its name should be changed to reflect its new multi-modal role, and steps should be taken to ensure that it doesn't continue to pursue road development as its main aim. In either case, there should be freedom to transfer money from a road solution to a rail solution if the latter is found to be more appropriate to a given corridor.

    (vi)  Performance measures for train operators should include the holding of connections.

    (vii)  There should be provision to impose a change in the terms of a franchise on the operator where this is required to meet needs that have newly emerged (or newly been recognised).

    (viii)   If the above steps fail to regenerate the rail industry, then it should be renationalised, and the cost involved written off as a one-off expense required to reverse a very costly blunder.





 
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