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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