Peer review: Jim Steer
Director, Steer Davies Gleave
Mike Jones wears a badge of honour as a founder member of the open access passenger train ‘club’, so he may be forgiven some of his views on the franchised part of railway-land. But I suggest you take his description of how franchising was seen in the past - variously, he says, a form of taxation, a barrier to competition and an opportunity for micro-management - with a large pinch of salt.
Franchising was always about transferring risk to the private sector in an acceptable way. The aim was to get a business-like approach to managing costs and to growing revenue. The constraints arose to protect customers - especially commuters who have no alternative - from price hikes (hence fares regulation), from cutting socially necessary services (first and last trains, for example), and from providing insufficient capacity. These matters do not trouble open access operators.
So we already know the answer to the self-proclaimed ‘Wolmar’ question: we know that franchising was designed to transfer risk, and to protect customers while doing so. Try telling any TOC Director or Board member there’s no risk involved, and you’ll soon understand the perennial risk born around safety, and (of course) financial failure.
The issue is this: has the latest incarnation of the franchising model given enough opportunity for innovation and for private sector investment? Is the level of risk transfer reasonable, and is the level of service specification kept to the level needed to protect customers?
Mike is certainly right to talk about the difficulty in staffing up an organisation when nerves were in tatters following the 2012 West Coast debacle. In mentioning the problem with the ‘civil service employment framework’, it’s not just a concern with pay levels for those tasked with large contractual negotiation.
My observation when at the Strategic Rail Authority (2002-05) was that people wanted to be part of the ‘railway family’, not the civil service, even while representing government’s interests. And if it was necessary then to combine in one
organisation responsibility for franchise oversight with strategic planning, how much more is that needed now, with such comprehensive investment programmes to be implemented?
The industry is feeling a sense of relief that the new franchises (and franchise extensions) that Mike describes so well are getting under way. A whole supply chain depends on this, not least the rolling stock sector.
The differing approaches to revenue risk transfer make sense. The old cap and collar system, while essential back in 2002 to keep the system alive post-Hatfield, ended frustratingly, stopping management ‘doing the right thing’. So it’s good to see arrangements such as those intended for East Coast, which will still transfer revenue risk, but with the impact of economic downturn mitigated.
The space I shall watch with great interest is the response to the Franchising Director’s urge “to engage with DfT in discussing innovative solutions that include new funding proposals”. It’s surely time for some franchisee-funded solutions, which means it’s time for franchising to show what it can deliver.
