Rail franchising ends after 24 years as government plans 'simpler' structure

Rail franchising has been "ended" by extending measures introduced to keep trains running after the coronavirus outbreak, the Department for Transport (DfT) has announced.
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Operators like TransPennine Express have been moved to "transitional contracts" ahead of the creation of a "simpler and more effective structure" which will be developed over the coming months, the DfT said.

The department has taken on franchise holders' revenue and cost risks since March, at a cost to taxpayers of at least £3.5 billion.

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"Significant taxpayer support will still be needed" under the new Emergency Recovery Management Agreements (ERMAs), the DfT said.

It went on: "Ministers today ended rail franchising after 24 years as the first step in bringing Britain's fragmented network back together."

Rail firms will continue to be paid a management fee for running services, but under the ERMAs it will be a maximum of up to 1.5 per cent of the franchise cost base, rather than two per cent under the Emergency Measures Agreements introduced in March.

Northern Trains Limited, Britain’s largest regional rail operator, is not affected by today’s announcement as it is in the hands of the Operator of Last Resort since being taken into public ownership earlier this year.

Leeds station is one of the busiest in the country. Pic: James HardistyLeeds station is one of the busiest in the country. Pic: James Hardisty
Leeds station is one of the busiest in the country. Pic: James Hardisty
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Transport Secretary Grant Shapps said: "The model of privatisation adopted 25 years ago has seen significant rises in passenger numbers, but this pandemic has proven that it is no longer working.

"Our new deal for rail demands more for passengers. It will simplify people's journeys, ending the uncertainty and confusion about whether you are using the right ticket or the right train company.

"It will keep the best elements of the private sector, including competition and investment, that have helped to drive growth - but deliver strategic direction, leadership and accountability.

"Passengers will have reliable, safe services on a network totally built around them. It is time to get Britain back on track."

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Since Britain's railways were privatised in the mid-1990s, the Government decided the levels of service and performance it wanted for most routes over a set number of years.

Private companies bid for the right to operate the franchises, with the Government selecting the winning candidates.

There were complaints about rising fares and poor punctuality for many years, but the chaotic introduction of new timetables in May 2018 - which caused huge disruption across Yorkshire - led the Government to accept that major reforms were required.

Trade unions want the operation of all train services to be brought back into the public sector, as has happened with Northern Trains and London North Eastern Railway.

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But the Government has given no indication it wants to take on control of more services.

The DfT described today's announcement as "the prelude" to a White Paper which will respond to the recommendations of Royal Mail chairman Keith Williams, who was commissioned by the Government to carry out a review of the railways.

Mr Williams said: "These new agreements represent the end of the complicated franchising system, demand more from the expertise and skills of the private sector, and ensure passengers return to a more punctual and co-ordinated railway.

"I am ensuring the recommendations I propose are fit for a post-Covid world, but these contracts kick-start a process of reform that will ensure our railways are entirely focused on the passenger, with a simpler, more effective system that works in their best interest."

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David Hoggarth, Strategic Rail Director for Transport for the North, said: “This is a significant moment for our railways with franchising as we know it ending after

24 years.

"The Department for Transport has made clear to us that our work in jointly overseeing rail operators in the North will continue under the Emergency

Recovery Measures Agreements (ERMAs).

“We have seen significant progress towards greater oversight in the North, both since the timetable crisis of 2018 and throughout the pandemic. Local decision-

makers have helped shape operating decisions for the benefit of passengers and this needs to continue.

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"These new transitional contracts will help us prepare for further reform as we work towards a more cohesive railway which can respond better to passenger needs as reflected in our submissions to the Williams Review."

Review.”Matthew Gregory, chief executive of FirstGroup, which owns four franchises, including TransPennine Express, said the ERMAs could lead to "a more appropriate balance of risk and reward for all parties".

He added: "We have long advocated for a more sustainable long-term approach to the railway, with passengers at its centre, and we look forward to working constructively with the DfT to make this a reality."

But Rail, Maritime and Transport union general secretary Mick Cash claimed "private rail companies are a waste of time and a waste of money". He insisted that "public ownership is the only model that works".

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Tan Dhesi, Labour's shadow rail minister, welcomed the extension of emergency funding but claimed it was "completely unacceptable" that taxpayers will continue to pay "hundreds of millions of pounds" in management fees to private companies.

He added: "These agreements paper over the cracks of a broken rail system. It's time to put passengers before profit and bring our rail franchises back into full public ownership."

Darren Shirley, chief executive of pressure group Campaign For Better Transport, said: "We welcome the Government's ongoing support for rail passengers and the decision to replace the franchising system.

"The future of the railway now depends on the creation of a new system that is centred around passengers, delivers social, economic and environmental benefits, and gives more devolution to regional and local governments with competition in the right places.

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"Delivering a reliable and affordable rail network that works for both commuters and leisure passengers is crucial to helping rebuild the economy and protecting the environment as part of a green transport-led recovery and today's announcement is a step in the right direction."