Memorandum submitted by Mr Tony Bolden
and Mr Reg Harman
INTRODUCTION
The country faces a number of very severe challenges:
global warming, the possibly imminent peaking of world oil supplies,
the poor quality of life in some urban areas and the need to maintain
a stable economic direction. With nearly 60 million people on
a relatively compact island land mass, it is vital that these
challenges are tackled in a firm and cohesive fashion. This means
that strategic plans and their implementation for the various
fields of national policy should be coordinated: in other words
they should draw their rationale from each other and from an overall
view of where we are going.
The development of the national rail passenger
system should fit within this, as passenger rail services form
an important tool for addressing the various challenges. The passenger
railway offers a significant, efficient and environmental friendly
means of travel for both commuting and for inter-urban travel.
At a time when the national economy has become more based on the
services sector—finance, administration, research, commercial
activities—it requires people to interact in many locations
in large numbers. The global environmental challenges will need
a serious reduction in movement by oil-powered transport systems,
and would benefit from more compact and environmentally benign
urban forms with a consequential uplifting in the quality of urban
life. In all of these, rail-based passenger transport forms a
crucial tool, enabling people to move within and between the main
urban areas with comfort and speed, while for the most part not
relying on oil fuels.
Under the current regime, development of the
passenger rail system is through the franchising regime, largely
as established by the 1993 Railways Act. This is not, however,
proving to be an effective and enduring mechanism. This submission
focuses on the purpose of franchising in this light. It looks
in turn at the current regime, especially its approach to producing
a railway strategy; the key factors in administration of railways
elsewhere in Europe; and what changes might be needed for rail
franchising to be an effective tool in a national development
strategy.
Is there a purpose to the system?
The current structure of railway franchising
was established to bring in private operation for Britain's railway
system. It did not appear to foresee substantial change to the
network over time, although implicitly it was expected that public
financial support for it would decline. Several factors have subsequently
arisen:
— Passenger numbers have grown
very substantially, especially for medium distance travel and
for commuting;
— Management and financial problems
with Railtrack as the infrastructure provider led to its demise,
and its successor Network Rail faces financial constraints in
expanding capacity to meet current pressures;
— Total public funding for the
various train operators has risen rather than declined;
— The creation and subsequent
abolition of a Strategic Rail Authority designed to bring a strategic
direction to the railway's development has meant that the responsibility
for overall strategic guidance is once more with the Department
for Transport;
— A series of Route Utilization
Strategies is being developed, aided by Regional Planning Assessments,
but these focus on making the best use of existing lines rather
than informing on where major development of the network should
be expected.
After the first round of franchises, in the
mid-1990s, the structure of franchises has gone through several
reviews. At one point it was considered that the franchises would
be very long (20 years), with the aim that the franchisee would
be responsible for investing in expansion of the infrastructure.
Subsequently the approach has reverted to what amounts to management
contracts within relatively short-term franchises. The geographical
and business content of franchises has also changed. Originally
the franchises were based on a division between inter-city, commuting
and regional type services. Now there are now more likely to be
based on one franchise operating exclusively as far as possible
into one London terminus, regardless of the nature of the business
to be serviced. Examples of this occur on services operating into
Liverpool Street and Paddington. The latest change will see new
franchises for both the West and East Midlands—again mixing
up the nature of service operations.
All franchises are now determined by the Department
for Transport, and appear to be awarded on a basis that is almost
entirely geared to financial objectives. However, there also appears
to be some confusion over the role of open access operators as
allowed by the Office of Rail Regulation (ORR) when they potentially
compete with existing franchisees. This confusion has been highlighted
recently by the award of an open access arrangement on the East
Coast main line that appears to conflict with the aspirations
and cost projections of a newly awarded franchise (largely because
insufficient track capacity is available). There thus seems to
be no proper and consistent understanding of what franchises should
be and how they should operate, which in turn does not allow for
proper planning and development of the railway system.
Particular concern has also been raised by the
failure of the system to match up with the needs of communities
at regional and local level, as particularly expressed in the
regional and local planning frameworks and their implementation.
This crucial problem has been well documented in both the professional
and general press over time. Three particular issues may be quoted,
as examples of the problem.
— The Government's Sustainable
Communities Strategy, dating from 2002, recognises the pressure
for population growth in the South East of England around London,
where the financial and administrative businesses form the backbone
of the UK economy. But no attempt has been made to support the
major housing growth envisaged across and beyond the Home Counties
with infrastructure, notably enhanced railway lines. The two major
projects of Crossrail and Thameslink continue to stutter through
planning processes, thirty years after their initial conception,
without any apparent recognition of their real significance.
— This in turn constrains the
pattern and scale of the passenger rail services in the region.
The franchising conditions for these continue to focus on medium
term financial priorities, with no regard to the effects on lifestyles,
economic impacts on the region or possible regeneration of socially
disadvantaged areas. For example, there is now pressure for franchisees
to "price off" excessive numbers at peak periods, in
order to avoid any investment in extra capacity, with no assessment
being made of the effect on London commercial and financial activities.
(A specific example concerns First Capital Connect, the new franchisee
of the Thameslink and Great Northern suburban lines, which has
brought in severe restraints on the evening use of off-peak tickets,
with no consultation.)
— Elsewhere in Great Britain the
Department for Transport has exercised a similarly tight direction
over service patterns for new franchisees. For example, in setting
the operating guidelines for the new Great Western franchise,
the Department required significant cuts in services for the various
West Country branch lines, leading to proposals by the franchisee
for reductions that amounted to no effective service for many
small stations. This saved a limited amount of running time, but
at the expense of cutting rail links from rural catchments to
the main cities, to which many people look for part-time jobs,
education, shopping, leisure and health. The potential effect
was that many people's lifestyles would be seriously undermined
or that they would make more use of cars for regular trips. The
initial proposals have now been withdrawn; but there are no proposals
to increase the level or quality of services or to integrate them
with other local transport.
The Department for Transport is now well into
the process for preparing the High Level Output Specification
(HLOS), which will set the direction for railway policy and implementation
into the next decade, and has recently issued a guidance note.
The HLOS is not itself the long-term strategy; but the actions
which it leads to will set the direction for the long term, as
the Department's note itself recognises. Therefore it is very
alarming that the approach indicated by the guidance note perpetuates
the status quo: it implies that the present railway system is
generally fine, subject to a few tweaks, and that these tweaks
can be achieved for significantly lower investment than today's
levels, through efficiencies in Network Rail. No attempt is made
to consider what the purpose of the railways might be or whether
this should require any real changes in the present structure.
This forms a dangerously narrow approach.
Development of railways elsewhere in Europe
Almost all of Europe's railways have been restructured
within the last decade, largely following the principles set out
in European Union Directive 91/440. The ways in which railways
are now developing across western, central and northern Europe
varies between countries, but a number of common features may
be identified. These differ from the British approach, in some
respects fundamentally. They are worth reviewing, as they offer
some guidance over the way in which changes might be brought to
the British regime, especially the franchising of passenger services.
The features broadly common to Britain's European
neighbours are briefly summarised in the following table and compared
to the current British structure:
| Common features for mainland Europe
| British approach |
| The national rail infrastructure is owned and managed by a public agency (constituted on very similar lines to the national trunk roads agency).
| The infrastructure is owned and managed by a nominally separate "not for divided" company.
|
| Railway infrastructure is developed by a consistent programme of investment, drawn from defined national and regional infrastructure funds.
| Infrastructure investment is funded by Network Rail from funds obtained mostly through funds for system use paid by Train Operating Companies (TOCs).
|
| TOCs pay a marginal cost for use of an infrastructure which is under consistent development.
| TOCs pay a cost for use of infrastructure aimed at recovering most system costs, including investment, this amounts overall to about half their total costs while not offering any gains in capacity.
|
| Steady upgrading of inter-urban and cross-country rail corridors continues, to balance out economic opportunities across the nation, with high speed rail links between the major cities as a key component in many countries.
| The South East remains economically buoyant, whilst other regions in the North and West are still economically weak by European standards, yet no real investment in inter-urban rail is planned to help spread economic growth.
|
| Upgrading of suburban rail capacity around main cities continues apace, especially through links across the national and regional capitals, to support access to their range of jobs and services (eg Paris now has five RER lines and Berlin has just opened its new Cross-city line).
| There is still no commitment to serious capacity increases around London, let alone any commitment to Thameslink or Crossrail.
|
| Electrification covering about two-thirds of the network on average and still extending, to reduce reliance on petroleum oil.
| One third of the British system operates on electric power, with no extensions in hand.
|
| The national main line passenger network is run by one national company (usually the former State company).
| The whole network is run by a number of different TOCs, with different policies applying even for the main national routes.
|
| Franchising of regional and local networks has mostly been transferred to regional and city bodies, who can ensure integration of timetables, ticketing and development with other modes.
| All decisions on railway services are taken centrally by the Department of Transport—there is very little scope for integration at regional and local level with other transport modes.
|
Passenger service franchising and development in Japan
Japanese railways are known to be safe, reliable and profitable.
Their nationalised system was privatised and split up in 1987,
but unlike ours it remained as an integrated railway system. Six
geographically defined passenger companies were formed but they
remained as vertically integrated companies responsible for all
aspects of operations. The Japanese companies carry four times
the number of UK passengers. Their tenure of operations is not
limited by a determined time period governing the length of franchise.
Possible changes to the current regime
Great Britain's position in face of the major world challenges
is no different to its European neighbours. In consequence it
cannot afford to make less effective use of its railway system
for the movement of people. The potential for achieving effectiveness
is held back by the present administrative regime, which seems
likely to be perpetuated by the present approach to the HLOS.
Overnight change is not feasible, but it is vital that the rail
franchising system is better able to produce a passenger rail
system which can play a key role in national development.
To this end we suggest that the following changes should
be considered:
— The purpose of franchising passenger rail
services should be made clearer and be more consistently applied
over time. It should not be just about meeting financial objectives
but should relate to wider developmental issues as well. It should
allow revenue risk to be taken by what are privately run companies
in ways which do not conflict with supporting sustainable development.
The role too of open access operators should be clarified in relation
to existing and potential new franchise operators;
— The charging regime for use of Network Rail's
infrastructure should be changed. Charges to TOCs should become
more marginal in nature, not aimed at recovering both fixed and
variable charges. Funding for Network Rail's management of the
system should be given directly, on the same basis as for the
Highways Agency. This would result in lower overall costs for
TOCs and more of their costs would be within their control. It
would also mean that public funding of the railway system would
be more under control, as it would be used fully by Network Rail,
not pass through the TOCs' finance systems.
— Responsibility for franchising of services
other than the main inter-city trunk routes and the London and
South East commuter network (the old Network South East in essence)
should be transferred to public bodies at regional and city level.
This would probably be local authorities, either singly or in
groups. The PTEs would play a major role in the main conurbations,
perhaps as part of the strengthened "city regions",
while elsewhere similar frameworks might be developed, following
the Lyons review of local government. In this way local rail services
could be developed to operate more efficiently in relation to
real local needs and opportunities, reflecting the knowledge and
expertise of local politicians, managers in TOCs, local transport
officers, and other stakeholders. Of course, while many services
may be developed along existing lines, there would be flexibility
to change their operation (eg to light rail or tram-train) or
in some cases to withdraw them if this provided more effectively
for local transport. An appropriate level of funding for this
should be made available to public authorities. Community rail
partnerships should be encouraged and developed so that rail services
are more integrated into local needs and lifestyles: this is particularly
important for rural lines.
— A consistent programme of public funding
for railway infrastructure should be developed. Of course it is
recognised that public funds are not unlimited, it would be possible
to proceed in a positive fashion through building up programmes
of medium size schemes that will address the immediate problems
faced by the industry while also leading into more consistent
investment. Proposals for this have been set out by the writers
recently in Public Money & Management. [4]
CONCLUSIONS
The current passenger rail franchising regime does not make
for easy or consistent progress. There is, despite substantial
growth in passengers travelling by rail, little prospect of expansion
in capacity. Projects to increase capacity, both large and small,
have no funding commitments attached to them. Railway services
are run by TOCs whose activities are heavily controlled by the
Department of Transport, mostly against financial objectives.
Private innovation on changing or expanding services is stifled.
There is virtually no scope for regional bodies or local authorities
to influence railway services and their development, despite their
responsibilities for spatial planning and other local transport.
This is damaging to the effective use of passenger railways.
The UK faces major challenges in terms of the environment,
the economy and society, and development of passenger railways
forms a most important part of the toolkit needed to address these.
Changes to the railways development and franchising network are
needed in this respect, and valuable directions are offered by
the commonalities of approach found in other European countries
and elsewhere.
4
Public Money & Management Volume 23 No 3 June 2006:
Let us have realism for Britain's railways. Back
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