UK suspends rail franchise system after passenger numbers slide

[John Ashworth]

UK suspends rail franchise system after passenger numbers slide

The British government has suspended the rail franchise system in a move that effectively nationalises any losses by railway companies for the next six months as the disruption from the coronavirus pandemic hits passenger numbers hard.

The Department for Transport announced on Monday that it would temporarily end normal franchise agreements and transfer all revenue and cost risk to the government for at least half a year. Operators will continue to run services day to day for a small management fee under an “emergency measures agreement”, it said.

Ministers said that the alternative — allowing railways to enter insolvency — would have led to even more disruption and a greater cost to taxpayers...

Rail franchising has hit the buffers. The question is, what replaces it?

Rail franchising is being suspended “for a limited period, initially six months,” said the Department for Transport. Are you sure? It seems more likely the whole franchising model, as understood since privatisation in the 1990s, is now finished for good.

Who, after all, will want to revive a system that the government’s own adviser, the former British Airways boss Keith Williams, last year described as unfit for purpose even in happier times? Train operators themselves surely won’t be lobbying for the return of their franchises on the same financial terms...

Management contracts, in which private sector firms shoulder fewer revenue risks and accept low-margin fixed fees, seemed to be one preferred way forward.

This is the model, in rough form, that has been adopted now in emergency, thereby disproving the notion that old-style franchising could only be dismantled gradually. The task, it turns out, could be achieved over a weekend...

[John Ashworth]

Has the government just renationalised Britain’s railways?

This morning, in what can only be characterised as a whimper rather than a wail, the rail franchising system that has been in place in Britain since 1996 came to a rather unceremonious end.

With travel limited to only critical workers as a result of the rapid spread of coronavirus – EVERYONE ELSE: STAY INDOORS – there was never a chance that the over-stretched rail system would cope in its current guise, and it was likely that government would have to step in.

And step in it has. Rather than taking the franchises back in-house (as it has previously done with LNER and Northern using so-called “operators of last resort”), the government has essentially re-awarded the franchise holders with quick-and-easy “stay-put, we’ll pay you” contracts.

This isn’t full-blown nationalisation. The private companies that currently run franchised trains will keep doing so, except that rather than paying a set premium to government based on their earnings, and keeping they rest, they’ll be paid a set amount by government (2 per cent over the cost of running the service) to keep trains moving, albeit to a reduced timetable. This is the operator model already used by Merseyrail, London Overground and TfL Rail.

However, when rolled out across the whole country, this does represent a radical shift in how our railways will be operated. And despite the stated expiry date of six months for this arrangement, it is very unlikely that we’ll see rail franchising return afterwards...