Rail Franchises to be Replaced with Fixed Fee Contracts

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LNW-GW Joint

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Simplistically, the TOC is run by DfT but the top people are 'agency staff' supplied by the contractor (SNC-Lavalin, et al).
I wouldn't call the OLR management simply agency staff.
Yes they are consultants, but they have a lot of clout (Robin Gisby had a senior role in NR for instance).
With two ex-franchises to manage, and fingers in all sorts of pies (like TfN future plans), they are very influential just now.
Their independence from the TOC owning groups is also an advantage.
What they lack is any major resource at their disposal (capital, stock, staff), so all investment decisions will be at the DfT level.
One bell-weather I'm using is if LNER get to order more 80x stock for the VTEC-planned service growth (to replace 225s).
I personally expect that to be knocked on the head by DfT, along with other "growth build" projects.
 
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RT4038

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I'm not sure that would be a fair test though? The premiums VTEC were contracted to pay were clearly wholly unsustainable which is why the franchise failed once it had burned through its parent company support. So expecting LNER to meet or even exceed them seems somewhat unfair. Surely the question should be is LNER paying the DfT a sustainable premium that maximises return to the taxpayer without bankrupting the company or preventing inward investment in the operation?
It's a fair test of 'turning the fortunes round'. DOR have not done better, or the same financially as VTEC [i.e. paying the DfT the contracted premium], and have done pretty much the same operationally. The implication of 'turning the fortunes round' is that somehow they have done better than VTEC, which they haven't. Have they kept the trains running when the franchise holders ran out of money and had to give up - yes. Not that I am suggesting it should have happened, but the DfT could have agreed lower premiums with the incumbents and got the same result.
 

BeHereNow

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It's a fair test of 'turning the fortunes round'. DOR have not done better, or the same financially as VTEC [i.e. paying the DfT the contracted premium], and have done pretty much the same operationally. The implication of 'turning the fortunes round' is that somehow they have done better than VTEC, which they haven't. Have they kept the trains running when the franchise holders ran out of money and had to give up - yes. Not that I am suggesting it should have happened, but the DfT could have agreed lower premiums with the incumbents and got the same result.
Which brings you back to, why is the private sector needed?
 

js1000

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The model should have always been concession based when the railways were privatised. A much more stable revenue stream than franchises that allows for central control when deciding on timetables etc.
 

DavidB

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I don't know. Why is rail different in the public eye do you think?
Because rail functions best as an integrated network, not the mess of overlapping franchises with the resultant confusing ticket mess, high variability in the standard and cleanliness of trains, and the tendency to try to blame each other when things go wrong.

Consistent branding and conditions would improve things considerably, no matter who was actually contracted to run particular services.
 

mrcheek

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I don't know. Why is rail different in the public eye do you think?
Because fares were cheaper under British Rail. and people dont understand that this is simply due to government decisions to reduce subsidy over time. When a supposed majority say they would support renationalisation, what they really mean is they want lower fares
 

DavidB

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The model should have always been concession based when the railways were privatised. A much more stable revenue stream than franchises that allows for central control when deciding on timetables etc.
But they were never really privatised apart from freight operations - the brief period of the infrastructure being in private hands was a disaster which was reversed, and the passenger train operations are a seried of time-limited, government-issued contracts with the government setting the rules- amd with a guarantee that the government will take over if things fall apart. This really isn't privatisation as it's normally understood, where businesses set their own rules and priorities and survive or fail as the case may be - and close down / get sold off if they do fail.
 

Tetchytyke

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The implication of 'turning the fortunes round' is that somehow they have done better than VTEC, which they haven't.
Well they have done better than VTEC because VTEC went bust.

Why are there no calls to renationalise BA, BAA, Stena, BT, British Gas...
BA and Stena are private companies operating in a competitive commercial environment.

There are regular calls to nationalise Openreach, not least by BT's competitors. Also water companies face regular demands to be nationalised.

Nobody clocks that BAA is privately owned and, again, they operate in a commercial environment.

British Gas are synonymous with ripping off old ladies.

Every other sector of the transport industry is pretty much privately run (but publicly regulated).
Most of the transport industry exists in a genuine competitive commercial marketplace. Where this isn't the case, as with trains and buses, there are regular calls for nationalisation or greater control.

Other than increased costs, what have the private TOCs ever done for us?

I'm not dogmatic about this, I simply don't see any benefit to a privately-operated railway industry, regardless of whether it's a concession or a franchise. In other transport sectors, such as aviation, the benefits are more clear-cut, not least because there is a genuine commercial marketplace which makes state involvement less appropriate (although Emirates say hi).
 
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DavidB

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Most of the transport industry exists in a genuine competitive commercial marketplace. Where this isn't the case, as with trains and buses, there are regular calls for nationalisation or greater control.
Regulation of buses is much lower than trains - hence there are now large areas of the country with no or inadequate bus services. Operators simply won't run unless they make a profit on the route or get a subsidy.
 

Silverlinky

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I always find it ironic that Unions go on about "fat cat salaries" yet fail to mention that most rail workers have benefitted hugely from privatization from a wage perspective.

Year in year out above RPI inflation pay increases have been awarded. Thinking specifically about traincrew, does anyone believe that Drivers would be paid circa £60,000 a year for a 35 hour 4 day week had the railways remained in public ownership? Privatization increased competition, allowed companies to poach from others and helped push up salaries.

I'm not knocking it, we are where we are, and traincrew are paid the "going rate" as it stands.....my point is that I believe that that "going rate" would be far lower had we not had privatization.
 

DavidB

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I always find it ironic that Unions go on about "fat cat salaries" yet fail to mention that most rail workers have benefitted hugely from privatization from a wage perspective.

Year in year out above RPI inflation pay increases have been awarded. Thinking specifically about traincrew, does anyone believe that Drivers would be paid circa £60,000 a year for a 35 hour 4 day week had the railways remained in public ownership? Privatization increased competition, allowed companies to poach from others and helped push up salaries.

I'm not knocking it, we are where we are, and traincrew are paid the "going rate" as it stands.....my point is that I believe that that "going rate" would be far lower had we not had privatization.
Yes, indeed - and particularly so in the case of drivers, whose salaries were quite low under BR and have only gone up so high because a market was created and TOCs poach from one another.

I don't begrudge them this, but it's undeniable that if BR had remained this wouldn't have happened.
 

jamesheet49

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Regulation of buses is much lower than trains - hence there are now large areas of the country with no or inadequate bus services. Operators simply won't run unless they make a profit on the route or get a subsidy.
But if you suggest on transport forums that franchising (in other words, a privately run bus service) might be a good idea, people consider you to be some kind of communist.
 

aar0

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(I would be surprised if the road vehicle fleets of a large number of government bodies aren't leased)
As ex CS (although topically enough, as a contractor), I can confirm this. In my department oddly enough they were supplied by Hitachi!
 

theironroad

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These talks between DfT and TOC parent groups really must be going down to the wire as, GWR excepted, the EMAs expire on Sunday 20/9, ie in 4 days time.

Maybe it'll be a Friday afternoon announcement???
 

dk1

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These talks between DfT and TOC parent groups really must be going down to the wire as, GWR excepted, the EMAs expire on Sunday 20/9, ie in 4 days time.

Maybe it'll be a Friday afternoon announcement???
One of our union reps said they'd been informed it would be the 24th which seems rather late in the day. Perhaps that's when they are meeting with management to discuss.
 

158801

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I wonder whether a late announcement is bad news. In other words, mass redundancies, service cuts etc. The later you announce it, with a short deadline for implementation, the better.
Alternatively, you could argue, that a late announcement is good news. They can't decide what to do so it's just more of the same for another 6 months.
 

dk1

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I wonder whether a late announcement is bad news. In other words, mass redundancies, service cuts etc. The later you announce it, with a short deadline for implementation, the better.
Alternatively, you could argue, that a late announcement is good news. They can't decide what to do so it's just more of the same for another 6 months.
From my understanding it's nothing like that at all. No service cuts ot redundancies envisaged.
 

theironroad

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I'm sort of expecting the 'more of the same' approach with no earth shattering changes. I imagine they are just arguing about tenths of a % point for the management fee.

That's just a hunch, zero evidence either way.....
 

Bletchleyite

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I'm sort of expecting the 'more of the same' approach with no earth shattering changes. I imagine they are just arguing about tenths of a % point for the management fee.

That's just a hunch, zero evidence either way.....
I'd imagine it will be the same as a management agreement for a TOC normally, i.e. as you say status quo, then change things later once it's in place.
 

moorw003

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It's getting down to the wire! 3 days until my company potentially doesn't operate anymore. It is most bizaare we've got to this point without any clarification.
 

pdeaves

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I wonder whether a late announcement is bad news. In other words, mass redundancies, service cuts etc. The later you announce it, with a short deadline for implementation, the better.
Alternatively, you could argue, that a late announcement is good news. They can't decide what to do so it's just more of the same for another 6 months.
The GWR franchise agreement in April was signed on 31 March, I believe. Leaving it late doesn't necessarily mean any problems.
 

Starmill

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CrossCountry's contract also expires in four and a half weeks. There must be a lot of talking to do.
 

theironroad

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It's getting down to the wire! 3 days until my company potentially doesn't operate anymore. It is most bizaare we've got to this point without any clarification.
Iirc, shell OLR companies were created for every toc earlier in year.

I'd imagine that if at 2359 there is no agreement then OLR will step in at midnight and require trains to keep going.

I doubt it'd be an airline administration scenario where once the plane lands it's grounded and can't be touched or operated.
 

ainsworth74

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I'd imagine that if at 2359 there is no agreement then OLR will step in at midnight and require trains to keep going.
Legally (though with this mob in charge I'm not sure if that actually means anything anymore) I believe the Secretary of State is under a duty to keep the trains running (some part of the Railways Act as I recall). So that should be exactly what happens. It will probably be a touch more chaotic than usual (as normally OLR get a bit of mobilisation time) but I would be surprised to see any significant disruption to operations even if it goes right down to the wire.
 

HowardGWR

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I don't know. Why is rail different in the public eye do you think?
Rail isn't in the public eye (10% or so of them), whereas nearly everyone has to use the utilities. Privatisation was seen as good (except perhaps for water) because there was competition created in the others.
 

Domh245

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Iirc, shell OLR companies were created for every toc earlier in year.

I'd imagine that if at 2359 there is no agreement then OLR will step in at midnight and require trains to keep going.
Once the EMAs expire, the TOCs revert to their normal franchise terms. Of course, as those aren't viable they'd collapse within a matter of days/weeks as the cash stumped up by the owning groups at the start of each franchise is burned through at which point they'd finally go to OLR, but we won't see TOCs folding at 0000 on the 20th unless they'd been on the verge of collapse before the EMAs were introduced (SWR/TPE).
 
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