4The East Coast Partnership
46.The DfT is developing plans to launch the East Coast Partnership (ECP) on the East Coast Mainline “as the first of the new generation of long term regional partnerships bringing together the operation of track and train under a single leader and unified brand.”124 At the start of our inquiry, the exact plans for the Partnership were not clear. In oral evidence, the Secretary of State elaborated that he expects:
… it to be a single team—either a contractual or corporate joint venture. We will probably talk more about a contractual joint venture. The entity that is created will have one boss responsible for the train and the tracks, and will have a team of track engineering types and a team of train people working for him or her, but a joint team will be running it.125
47.In terms of whether they Network Rail and the operator would be financially integrated, Polly Payne of the DfT said:
… we would not be hoping to have a single balance sheet or do anything very complicated in that way because of that experience. We would be looking more at trying to incentivise management incentives, KPIs and balance score cards.126
48.Both Network Rail127 and Stagecoach128 said they are supportive of the ECP proposal, with the latter of the view that “full route-level devolution will be required to deliver the step change needed … but [this] has not yet happened.”129 The Secretary of State agreed that route devolution130 was needed to make the ECP “operationally workable”.131 When pressed on their reasons for supporting the Partnership proposal, Network Rail and Stagecoach said they supported the principle of more integrated working but did not know how it would work, or whether it would be a success or not.132 While Lord Adonis accepted that while there was merit in a partnership approach, he was critical of the lack of clarity around the proposal and said that there could be considerable costs in planning for this, particularly if it is mishandled:
It is an entirely back-of-the-envelope plan for a public/private partnership. Nobody can define it or has the faintest idea of its elements. Vast payments will be made to consultants and others to try to turn that into some kind of reality within 18 months. I doubt that is possible because I suspect that the east coast public company will end up being in existence for a lot longer but with a constant sentence of death over it, which will not give it a fair run.133
49.This is not the first time that a form of ‘partnership’ arrangement has been attempted on the UK network. For example, in April 2012, NR entered a ‘deep alliance’134 with South West Trains (operated by Stagecoach), putting in place a single joint management team responsible for infrastructure and train operations on NR’s Wessex Route. In terms of what the alliance delivered, Martin Griffiths of Stagecoach commented:
We got a single chain of command. There was one management team. We took a lot of day-to-day disruption and incident management down significantly. One of the questions was about conflict of interest. We managed that; there was no conflict of interest.135
50.He acknowledged that, at the time, there was a desire to financially integrate the operations, which was very difficult136 and was eventually the reason why the deep alliance ended in June 2015.137 Mr Griffiths said that these were issues that would remain with any Partnership form and ultimately it comes down to how much the operations can be financially integrated.138 Rail consultant Iryna Terlecky was critical of the proposal on the financial grounds:
I am not sure that there is necessarily a huge amount of logic in it. What Network Rail does in terms of looking after the infrastructure, it does very well. Train operators have a completely different outlook on the railway and passengers, and a completely different economic structure. It is not clear to me how you can ever squeeze those two things back together.139
51.One of the other main limitations of deep alliancing or partnership approaches is that, where there are multiple operators on a route, Network Rail is unable to establish deeper commercial relationships with a TOC. This is because it has an obligation to manage relationships with TOCs in a non-discriminatory manner. The ECML is part of London North Eastern and East Midlands (LNE & EM), which is a devolved route business within Network Rail. Franchised operators of intercity, regional and commuter services, as well as open access140 and freight operators, also use the ECML. Current operators on the ECML include: CrossCountry; East Midlands Trains; First TransPennine Express; Grand Central; Great Northern; Hull Trains; Northern; and Virgin Trains East Coast.141 Iryna Terlecky told us:
I have no idea how it might work. I have to say that, if I was doing this kind of partnership, I would not do it on east coast. It seems completely counter-intuitive.142
52.The Secretary of State, in oral evidence, also conceded that “if you were starting off a strategy of joining up track and train on a blank sheet of paper, this is not the place you would start.”143 Lord Adonis believed that “all the decisions [will be] made to prioritise [the partnership] services, including decisions on engineering works and the phasing of investment”144 Jo Kaye of Network Rail said that these decisions would be taken by the system operator, which are dictated by the track access codes and the codes that are in place in the industry.145 But Rob McIntosh, Route Managing Director of Network Rail’s London North Eastern and East Midlands Route, expressed concerns about what it might mean for the operations on the network:
The reason people say the east coast is not the best place to do that is the multi-operator nature of it. It is a large piece of railway that we have to operate, and I have a large number of customers. What people are concerned about is that the day-to-day operations become affected by this, and what would be called regulating policy—whose train gets to go first, on a particular day in a particular situation—starts to get clouded by that.146
53.Iryna Terlecky also said:
One of the things that concerns me about the idea of an east coast partnership is that, in chasing something that is inherently very complex and very difficult to achieve, some of the good things might fall by the wayside, which are about continuing cultural alignment and the one industry way of working that can be done anyway.147
54.We conclude that greater joint-working and clear lines of accountability through a single person responsible for track and trains offers potential for significant improvement in services. The mechanics and complexity of the current financial and regulatory environment has meant that all previous attempts to establish deep alliances have not worked. It is not yet clear how the East Coast Partnership will more successfully overcome the systemic difficulties presented by the current financial and regulatory environment. Based on the current framework, we conclude that the East Coast Partnership is unlikely to provide scope for the step-change in performance that the Secretary of State might be anticipating. This proposal also risks adding an additional layer of complexity to this part of the network. Passengers will ultimately bear the risk if this proposal goes wrong. This seems to be an unnecessary risk on this part of the network, particularly given that passenger satisfaction is already relatively high at 92%. We recommend that any review of franchising should consider what change would be needed to the financial and regulatory framework to make partnership working a viable and sustainable model for operating the railway in the future. We recommend that the Department set a timetable for publishing the detail of how it expects the East Coast Partnership will work.
55.Decision-making should be based on a clear plan and a transparent assessment of that plan. In this instance, neither of those things have occurred and we are concerned that future operations on a major part of the UK’s network will be captive to a concept absent of a plan or an assessment. Before experimenting with this Partnership, we recommend the Secretary of State lay out in detail how the new approach will work and conduct a proper assessment of its feasibility against those plans. This assessment needs to demonstrate that his proposal will offer better value for money for the taxpayer and better outcomes for passengers than other ways of operating. We recommend the Secretary of State review his decision to go-ahead with this partnership based on the findings of this assessment.
130 Route devolution is the proposal to decentralise powers and decision-making to the Network Rail route level.
134 A “deep” alliance can be defined as one in which one of Network Rail’s routes (or potentially part of a route) and a train operator share upside and/or downside risk against an agreed baseline for all or most of their activities.
140 A train operating company not subject to the franchising process which instead purchases individual paths on the East Coast Main Line from Network Rail
141 Network Rail, London North Eastern and East Midlands, accessed 25 April 2018
Published: 12 September 2018