Railway franchises in the coming year

[The Stationmaster]

59 minutes ago, rockershovel said:

Re Stationmaster, above, I’d be interested to know what the “philosophical basis of the franchising system” actually IS, in his view? 

 

As far as I could ever see, it amounted to “privatisation at all costs” to “the usual suspects” plus a series of new companies (Jarvis being a classic example) involving clear conflicts of interest 

I would have thought it was plainly obvious but as it doesn't appear to be maybe I should explain further.  The basic idea is that a group of rail services, with a certain degree of specification regarding which trains are required to be run but with some freedoms remaining on which to make commercial decisions which might enhance the profitability the franchisee will achieve.  Tthis usually means the level and pricing of extraneous matters such as catering and car parking but can also include the possibility of improving train services by taking a further commercial risk and control of some fares

 

What the method introduces - both in the UK and in various other countries which use it such as Germany - is an element of competition in the bidding for the franchise and that will not be solely related to price but could also include various extraneous matters (car parking for commuter use is a good example) or enhancement of the service in terms of number of trains and the capacity of trains beynd the expected or previous situation or that offered by competing bidders.  In addition it also  allows the  organisation letting the franchise a degree of choice - which should not be based solely on price although tha is very largely how DafT have worked in recent years.

 

Thus - provided the term of the franchise allows it - a franchisee can be encouraged to invest - Chiltern being an excellent example of this.  Equally with a degree of freedom in choice of available rolling stock a franchisee can decide to respond to public demand and take a commercial risk of, say, increasing capacity - something which GWR did on the Reading - Basingstoke route when it was a 'pure' franchise (and something which has gone now it is basically a contract instead of a franchise).

 

While franchises can come with ill thought out strings where the amateurs come in (e.g DOO on Southern) real cost control lies with the franchisee provided the financial structure of the franchise in terms of the way it is let is correct.  Regrettably - again due to either amateurism or greed within DafT's letting of some franchises - the system doesn't always work as well as it should and equally franchisees can be landed with problems not of their making - again due to poor specification by Daft T (e.g Northern and SWR) or they make excessive profits due to amateurism in the terms (e.g Stagecoach/Virgin on the WCML - although they were generally delivering to the passenger what they had promised.

 

In contrast the management contract is simply a contract to manage what you are given.  there is no opportunity for any element of commercialism and judging by their past record I can't really imagine DafT being capable of running such a system because bidders will be wary of the impossibilities of what is being offered and will have little or no financial incentive to apply commercial ambition to a job which doesn't offer them any return.  Equally there are what might be termed as 'unintended consequences' in such an approach.  The reason for this is simple - bidders and certainly various of the trades unions will quickly realise that there is in effect a national railway system and no longer a series of different franchises with different characteristics.  So the unions if they are bright enough (and ASLE&F very definitely is) will immediately ask for common national pay scales and conditions across the whole network and somebody will have to negotiate with them on a national basis - simple question is who would do that (not forgetting that national wage bargaining in the rail industry vanished over a quarter of a century ago).  That of course involves another question - who will the employer be?   And as for 'national' control of a rolling stock fleet just look at the recent shambles of the mismanagement of that when it comes to cascade and conditions basically imposed by DafT - who don't appear to have the first idea of the practicalities of what they have insisted on.

 

Don't forget that in a contract situation the contractor will have less choice about the number and origin of the staff they are using - the staff will come with whatever they have contracted to run and with pay scales and conditions of employment over which they will have limited (if any) control.  It's far removed from bidding for a contract to do a job, or - say - build something where the contractor can employ their own staff and hire & fire labour to suit their method of working.  In view of what has happened in some franchises in the past where 'clever' managers cut staffing costs in a short-sighted kiddywink fashion I can't see any sensible body letting these contracts give that sort of power to a contractor (although DafT might of course do it - but they'll get the blame when trains are subsequently cancelled, which they've avoided thus far(.

 

Don't get me wrong - I think BR was pretty good at running the British rail network but it cannot be reinvented, whatever nutty politicos might say.  The British railway industry is where it is and I think contracting in all but very specialised circumstances will not work at all well - assuming anybody actually bothers to bid.  As so often in this country what is gong on at the moment increasingly strikes me as a sticking plaster being applied over a minor wound and not an effort to correct the underlying illness (which is the mismanagement of a system which has, by example, been proven to work managerially and to work in favour of the rail passenger.

[rockershovel]

What is meant by “The basic idea is that a group of rail services, with a certain degree of specification regarding which trains are required to be run but with some freedoms remaining on which to make commercial decisions which might enhance the profitability the franchisee will achieve.”? 

 

“A group of rail services..” WHAT? Operate as a coherent whole, to overall strategic direction? Operate as the franchisee thinks fit? Operate at commercial rates? Operate at specified rates? Must be maintained by the operator, fit to be passed to their successor? 

 

 

During the recent “Matter of Britain and Europe”, a term was bandied about - “magical thinking”. It appears to mean “an unrealistic belief that desired outcomes, often not clearly defined, will appear for no readily identifiable reason” and this also appears to apply in considerable degree, to rail privatisation. I’ve never understood quite WHAT the John Major administration envisaged as emerging from their mad dash to privatise before the electorate expelled them, as was clearly inevitable by then.

 

Edited February 17, 2020 by rockershovel

[Dunsignalling]

1 hour ago, D9020 Nimbus said:

Hardly that problematical — just the winning company bid far too much (in each case). You'd have thought that if a previous operator had failed to make enough to cover the payments to be made to Government, future operators wouldn't offer even more… and the malaise is spreading to other operations now.

You would think that, wouldn't you!

 

However, there will be non-recoverable costs for franchise holders displaced from other routes if they decide to exit rail operations altogether.

 

That said, and despite their protestations to the contrary, I'm guessing Virgin and Stagecoach may be privately quite relieved at their reduced exposure to the UK rail sector as it seems likely to develop. If they are smart, they'll steer clear until the dust settles.

 

However, I think there may be some inherent and very long-standing problem with the ECML route in commercial terms.

 

Wasn't even the LNER in peril of insolvency throughout much of the 1923-48 period? I'd think that might have had much to do with fare levels on what should have been their most profitable route being constrained by competition from the financially much stronger LMS.

 

John

[royaloak]

7 hours ago, Ron Ron Ron said:

The press has now been briefed that the announcement will come in the next few weeks.

The word is, a new authority is to be created to award the management contracts and oversee their operation.

How far this will remove the DafT’s sticky fingers from direct control, is yet to be revealed.

So that begs the question, what is the difference between the old broom and the new broom?

Edited February 17, 2020 by royaloak

[Ron Ron Ron]

9 minutes ago, Dunsignalling said:

....However, I think there may be some inherent and very long-standing problem with the ECML route in commercial terms.....

 

Then explain why under VTEC, operationally the ICEC franchise was very profitable; quite probably the most profitable period since WW2?

It was the terms of the franchise and the high level of premium payments (that VTEC happily signed up to) that rendered the franchise unsustainable.

With much lower and realistic levels of premium payment, VTEC might still be operating profitably today.

 

Similarly, VTEC's predecessor, the OLR "East Coast", without the millstone of similar franchise terms, was also able to operate profitably, albeit with almost no investment required.

 

There can be no clearer examples of how it wasn't the concept of franchising that has been the problem, but they way the franchising system has been organised (or is that disorganised?) and run (mismanaged?) by the DfT.

 

 

.

[Ron Ron Ron]

3 minutes ago, royaloak said:

So whats the difference between the old broom and the new broom?

 

The new broom is a Nimbus 2000.

 

 

 

.

[royaloak]

6 hours ago, 4630 said:

My understand is that this will require parliamentary time and a budget for the proposed new authority.  Consequently, I would anticipate an announcement simultaneous with the forthcoming Budget. Which, as we know after last weeks reshuffle, has been put back for a short time.

No prizes for guessing where that budget will be coming from!

[96701]

1 hour ago, Dunsignalling said:

You would think that, wouldn't you!

 

However, there will be non-recoverable costs for franchise holders displaced from other routes if they decide to exit rail operations altogether.

 

That said, and despite their protestations to the contrary, I'm guessing Virgin and Stagecoach may be privately quite relieved at their reduced exposure to the UK rail sector as it seems likely to develop. If they are smart, they'll steer clear until the dust settles.

 

However, I think there may be some inherent and very long-standing problem with the ECML route in commercial terms.

 

Wasn't even the LNER in peril of insolvency throughout much of the 1923-48 period? I'd think that might have had much to do with fare levels on what should have been their most profitable route being constrained by competition from the financially much stronger LMS.

 

John

When I worked for Inter City East Coast, we were a self accounting unit within BR. Inter City made a profit. The only profitable Inter City routes were Gatwick Express and East Coast, now East Coast is supposed to be a basket case. It would appear that profit or loss in the rail industry can depend entirely on what is measured and how it is measured.

[rockershovel]

Exactly. It’s my firm belief that the basic concept, that private management can inherently produce a profit from any rail service, is fundamentally flawed. I’m also certain that rail privatisation was carried out by the John Major administration for ideological reasons and no clear overall strategic vision for the actual process of operating a mass public transport network, ever existed. 

 

I firmly believe (and indeed, Stationmaster appears to circumnavigate this above) that fragmentation and casualisation of the workforce has been a primary goal of privatisation, throughout. In context, that “efficiencies and savings” are primarily achieved by wage erosion, loss of training and opportunity, and loss of job security. This poses particular problems for any government facing election, because the electorate generally, don’t support this; why would they? 

 

There is also the matter of “socialisation of risk, privatisation of profit”, an interesting phrase which appeared in the public debate post 2008. Again, this has little to commend it to those voters, who persist in their stubborn belief that the function of government, is to govern the country in the common interest. 

 

All attempts to resolve this conundrum subsequently have foundered on these rocks. 

[Dunsignalling]

3 hours ago, 96701 said:

When I worked for Inter City East Coast, we were a self accounting unit within BR. Inter City made a profit. The only profitable Inter City routes were Gatwick Express and East Coast, now East Coast is supposed to be a basket case. It would appear that profit or loss in the rail industry can depend entirely on what is measured and how it is measured.

'Twas ever thus, or at least since the lead up to the Beeching Report.

 

John

[mdvle]

3 hours ago, 96701 said:

When I worked for Inter City East Coast, we were a self accounting unit within BR. Inter City made a profit. The only profitable Inter City routes were Gatwick Express and East Coast, now East Coast is supposed to be a basket case. It would appear that profit or loss in the rail industry can depend entirely on what is measured and how it is measured.

 

There is a difference between a route making a profit, and a TOC making a profit.

 

I would guess East Coast as a route still makes a profit (based on the franchises being expected to return a premium to the government), by the TOC's have operated as a loss because the private companies bidding for the franchise have promised premiums that are too high.

3 hours ago, rockershovel said:

I firmly believe (and indeed, Stationmaster appears to circumnavigate this above) that fragmentation and casualisation of the workforce has been a primary goal of privatisation, throughout. In context, that “efficiencies and savings” are primarily achieved by wage erosion, loss of training and opportunity, and loss of job security.

 

Except all the comments on here are that the workforce is earning far more now than they did under BR...

 

[Dunsignalling]

5 hours ago, Ron Ron Ron said:

 

Then explain why under VTEC, operationally the ICEC franchise was very profitable; quite probably the most profitable period since WW2?

It was the terms of the franchise and the high level of premium payments (that VTEC happily signed up to) that rendered the franchise unsustainable.

With much lower and realistic levels of premium payment, VTEC might still be operating profitably today.

 

Similarly, VTEC's predecessor, the OLR "East Coast", without the millstone of similar franchise terms, was also able to operate profitably, albeit with almost no investment required.

 

There can be no clearer examples of how it wasn't the concept of franchising that has been the problem, but they way the franchising system has been organised (or is that disorganised?) and run (mismanaged?) by the DfT.

 

 

.

But, had they not signed up to the premium levels that made the franchise unsustainable, VTEC might well not have got it in the first place.

 

They are by no means the only people who should have known better than to chase after franchises in the (as it turned out, forlorn) hope that the figures might  exceed expectations sufficiently to provide an antidote to the DfT's poisoned chalice.

 

Franchising did indeed work, at least on some levels. They may not appreciate it, but many (non-enthusiast) travellers are no longer being dragged around in yet-again-refurbished Mk2 coaches, probably by Class 57s, purely because of it. It wasn't perfect, but if nothing else it stopped the Treasury forever turning the tap off and on where rolling stock procurement was concerned.   

 

John

[96701]

3 minutes ago, Dunsignalling said:

They may not appreciate it, but many (non-enthusiast) travellers are no longer being dragged around in yet-again-refurbished Mk2 coaches, probably by Class 57s, purely because of it. It wasn't perfect, but if nothing else it stopped the Treasury forever turning the tap off and on where rolling stock procurement was concerned.   

 

John

Errrm Amey Abellio are running refurbished MkIIs with 37s instead of Pacers and are still running Pacers in Wales...........

Edited February 17, 2020 by 96701
Spelling

[mdvle]

1 minute ago, Dunsignalling said:

But, had they not signed up to the premium levels that made the franchise unsustainable, VTEC might well not have got it in the first place.

 

Which, in the end, is part of the problem.  They are over aggressive in the bidding because they know they can essentially hand back the keys and walk away with no penalty if the numbers don't work.

 

On the other hand, if the franchise agreement was such that they would owe the premiums regardless of whether they operate for the full franchise term, perhaps that would be incentive for them to crunch the numbers more carefully and bid more realistically?

 

 

[rockershovel]

.....I’d hope that the workforce WERE earning more than under BR, given that BR was wound up twenty-five years ago. Certainly a friend of my wife’s, on the ticket counter in Peterborough, doesn’t share that view. 

 

Working at Werrington has been instructive. I have regular contact with the ALO, COSS etc and I don’t believe that any ex-BR personnel are present, apart from a few semi-retired contract personnel. I don’t believe that there is any real collective memory of BR still present, most are gone and the rest are so overlaid with memories of subsequent events that no useful picture survives. 

 

I’d also offer the comment that IR35 is going to cause a serious shock to the numerous agency personnel in the coming year....

 

[royaloak]

2 hours ago, mdvle said:

Except all the comments on here are that the workforce is earning far more now than they did under BR...

 

But you basically have the same number of staff members operating over twice as many trains.

[Dunsignalling]

8 hours ago, 96701 said:

Errrm Amey Abellio are running refurbished MkIIs with 37s instead of Pacers and are still running Pacers in Wales...........

Hence my use of the word many, rather than all.

 

We also still have Pacers (Cl.143, admittedly the best of their ilk by some margin) running around in Devon, though I have recently noticed they no longer form entire trains, being used in multiple with access-compliant units. Those are usually Class 150s and as I don't need the facilities they provide, and most of the track down here is now CWR, I prefer the lower noise levels in the four-wheelers.

 

John

[Joseph_Pestell]

12 hours ago, 96701 said:

It would appear that profit or loss in the rail industry can depend entirely on what is measured and how it is measured.

 

Any industry, not just rail.

[Joseph_Pestell]

11 hours ago, rockershovel said:

Exactly. It’s my firm belief that the basic concept, that private management can inherently produce a profit from any rail service, is fundamentally flawed. I’m also certain that rail privatisation was carried out by the John Major administration for ideological reasons and no clear overall strategic vision for the actual process of operating a mass public transport network, ever existed. 

 

I firmly believe (and indeed, Stationmaster appears to circumnavigate this above) that fragmentation and casualisation of the workforce has been a primary goal of privatisation, throughout. In context, that “efficiencies and savings” are primarily achieved by wage erosion, loss of training and opportunity, and loss of job security. This poses particular problems for any government facing election, because the electorate generally, don’t support this; why would they? 

 

There is also the matter of “socialisation of risk, privatisation of profit”, an interesting phrase which appeared in the public debate post 2008. Again, this has little to commend it to those voters, who persist in their stubborn belief that the function of government, is to govern the country in the common interest. 

 

All attempts to resolve this conundrum subsequently have foundered on these rocks. 

 

It's surprising how often John Major is seen on TV giving his opinion given that his Govt was so lacking in any strategic thinking. Privatisation was dogmatic based on a strong belief that "BR was deeply inefficient". No evidence was ever produced to back up that belief. And now we find the railways costing the taxpayer far more than they ever did in BR days.

[Dunsignalling]

8 hours ago, mdvle said:

 

There is a difference between a route making a profit, and a TOC making a profit.

 

I would guess East Coast as a route still makes a profit (based on the franchises being expected to return a premium to the government), by the TOC's have operated as a loss because the private companies bidding for the franchise have promised premiums that are too high.

 

Except all the comments on here are that the workforce is earning far more now than they did under BR...

 

I've been out of it for seven years now and am not fully conversant with what has happened to rates in the meantime. I also wasn't in a group being competed for on the basis of demand exceeding supply, as drivers are.

 

By the time I left, basic rates had gone up dramatically over those prevailing when I began, but much of that increase resulted from the consolidation of multifarious allowances that were previously added on. Overall, my standard of living had certainly improved but a fair bit of that was due to my having paid off the mortgage. With the effect of General inflation stripped out, I'd say "far more" would have been stretching things.

 

John

Edited February 18, 2020 by Dunsignalling

[phil-b259]

15 hours ago, The Stationmaster said:

I would have thought it was plainly obvious but as it doesn't appear to be maybe I should explain further.  The basic idea is that a group of rail services, with a certain degree of specification regarding which trains are required to be run but with some freedoms remaining on which to make commercial decisions which might enhance the profitability the franchisee will achieve.  Tthis usually means the level and pricing of extraneous matters such as catering and car parking but can also include the possibility of improving train services by taking a further commercial risk and control of some fares

 

What the method introduces - both in the UK and in various other countries which use it such as Germany - is an element of competition in the bidding for the franchise and that will not be solely related to price but could also include various extraneous matters (car parking for commuter use is a good example) or enhancement of the service in terms of number of trains and the capacity of trains beynd the expected or previous situation or that offered by competing bidders.  In addition it also  allows the  organisation letting the franchise a degree of choice - which should not be based solely on price although tha is very largely how DafT have worked in recent years.

 

Thus - provided the term of the franchise allows it - a franchisee can be encouraged to invest - Chiltern being an excellent example of this.  Equally with a degree of freedom in choice of available rolling stock a franchisee can decide to respond to public demand and take a commercial risk of, say, increasing capacity - something which GWR did on the Reading - Basingstoke route when it was a 'pure' franchise (and something which has gone now it is basically a contract instead of a franchise).

 

While franchises can come with ill thought out strings where the amateurs come in (e.g DOO on Southern) real cost control lies with the franchisee provided the financial structure of the franchise in terms of the way it is let is correct.  Regrettably - again due to either amateurism or greed within DafT's letting of some franchises - the system doesn't always work as well as it should and equally franchisees can be landed with problems not of their making - again due to poor specification by Daft T (e.g Northern and SWR) or they make excessive profits due to amateurism in the terms (e.g Stagecoach/Virgin on the WCML - although they were generally delivering to the passenger what they had promised.

 

In contrast the management contract is simply a contract to manage what you are given.  there is no opportunity for any element of commercialism and judging by their past record I can't really imagine DafT being capable of running such a system because bidders will be wary of the impossibilities of what is being offered and will have little or no financial incentive to apply commercial ambition to a job which doesn't offer them any return.  Equally there are what might be termed as 'unintended consequences' in such an approach.  The reason for this is simple - bidders and certainly various of the trades unions will quickly realise that there is in effect a national railway system and no longer a series of different franchises with different characteristics.  So the unions if they are bright enough (and ASLE&F very definitely is) will immediately ask for common national pay scales and conditions across the whole network and somebody will have to negotiate with them on a national basis - simple question is who would do that (not forgetting that national wage bargaining in the rail industry vanished over a quarter of a century ago).  That of course involves another question - who will the employer be?   And as for 'national' control of a rolling stock fleet just look at the recent shambles of the mismanagement of that when it comes to cascade and conditions basically imposed by DafT - who don't appear to have the first idea of the practicalities of what they have insisted on.

 

Don't forget that in a contract situation the contractor will have less choice about the number and origin of the staff they are using - the staff will come with whatever they have contracted to run and with pay scales and conditions of employment over which they will have limited (if any) control.  It's far removed from bidding for a contract to do a job, or - say - build something where the contractor can employ their own staff and hire & fire labour to suit their method of working.  In view of what has happened in some franchises in the past where 'clever' managers cut staffing costs in a short-sighted kiddywink fashion I can't see any sensible body letting these contracts give that sort of power to a contractor (although DafT might of course do it - but they'll get the blame when trains are subsequently cancelled, which they've avoided thus far(.

 

Don't get me wrong - I think BR was pretty good at running the British rail network but it cannot be reinvented, whatever nutty politicos might say.  The British railway industry is where it is and I think contracting in all but very specialised circumstances will not work at all well - assuming anybody actually bothers to bid.  As so often in this country what is gong on at the moment increasingly strikes me as a sticking plaster being applied over a minor wound and not an effort to correct the underlying illness (which is the mismanagement of a system which has, by example, been proven to work managerially and to work in favour of the rail passenger.

 

Nothing wrong with your analysis in General - but you cannot ignore the fact that TfL have in the past made an excellent job of their Overground operation (NLL, WLL, ELL, etc. even though that was let as a man agent contract / concession arrangement rather than a franchise.

 

In general franchises are probably better suited to long distance operations while commuter services around major cities are better let as concession jobs so they can be properly integrated with other transport modes.

[rockershovel]

5 hours ago, Joseph_Pestell said:

 

It's surprising how often John Major is seen on TV giving his opinion given that his Govt was so lacking in any strategic thinking. Privatisation was dogmatic based on a strong belief that "BR was deeply inefficient". No evidence was ever produced to back up that belief. And now we find the railways costing the taxpayer far more than they ever did in BR days.

 

The John Major administration was a strange period. He was appointed as a “safe pair of hands” to manage the Conservative Party, during what was expected to be a period of internal recrimination and faction fighting in opposition. He then surprised everyone by winning a narrow majority, which eroded to nothing over time and ended in the greatest electoral defeat of the 20th Century. 

 

No administration which opens with the debacle of the EMU, and ends with the chaos of rail privatisation and utter defeat at the polls, can make any serious claim to strategic thinking. However Major’s handling of the Maastricht Treaty in the Commons is another matter. 

 

I am firmly of the opinion that the Maastricht Treaty would have been heavily defeated in any Referendum on the subject, or in any General Election revolving around it, given its nature. Major managed to force it through the Commons by making it an issue of confidence, WITHOUT making it a Vote Of Confidence in his administration, and without generating serious debate in the press about its nature - all without having a workable majority. This was a considerable feat of tactical management and applied understanding of the nature of Parliamentary procedure. 

 

To achieve this, whilst presiding over an administration which acquired a considerable reputation for insalubrious behaviour and still retain a personal reputation for gravitas, was no mean feat. He also successfully navigated that common graveyard of political reputations, a sex scandal involving another member of his Cabinet - which was widely regarded as a piece of political slapstick, given the identity of the other participant. 

 

John Major was, and remains a much under-rated figure, I feel. The nature and long-term consequences of his achievements are quite another matter. 

[D9020 Nimbus]

23 hours ago, The Stationmaster said:

 

Don't get me wrong - I think BR was pretty good at running the British rail network but it cannot be reinvented, whatever nutty politicos might say.

 

Would you have thought that in 1948? Why is reinventing BR impossible? Your remark requires justification, IMHO. On the face of it, there appears no real reason—now that we have left the EU—why BR cannot be reinvented, and if it did a good job of running the network, why not? Or is there not sufficient management expertise available any more?

[rockershovel]

25 minutes ago, D9020 Nimbus said:

 

Would you have thought that in 1948? Why is reinventing BR impossible? Your remark requires justification, IMHO. On the face of it, there appears no real reason—now that we have left the EU—why BR cannot be reinvented, and if it did a good job of running the network, why not? Or is there not sufficient management expertise available any more?

 

BR was a creature of its time, as were the other nationalised industries. Most of our industries were exhausted and  severely run down after thirty years of war and depression. The currency was weaker than it had ever been. The whole political landscape was in disarray, and evolving rapidly in directions which were difficult to predict. 

 

The electorate was in an ugly and dangerous mood, having been provoked far beyond its patience. 

 

There wasn’t a viable option. 

 

Whether there was sufficient management ability available is quite a good question. The general collapse of wide swathes of British industry (from locomotives to motorcycles, textiles to aircraft) in the period 1945-65 suggests that the challenges of defining a viable course of action, and following it through successfully, overcame everyone who attempted it.

 

BR was also heir to decades of neglect of strategic direction. We SHOULD have pursued electrification in the 1930s, but didn’t; we COULD have followed the otherwise general practice of copying or appropriating, anything and everything the Germans had to offer, but didn’t. 

 

We couldn’t recreate the original BR, but the times are different. We COULD recreate a modern version, simply by allowing events to take their course as franchises expire, but I see no political will to do this. My best estimate is that we will gravitate towards a de-facto nationalisation, by which the State becomes, by default, the overall director of strategic policy, operating through a system which amounts to cost-plus management contracting. 

 

 

[andyman7]

17 hours ago, Dunsignalling said:

But, had they not signed up to the premium levels that made the franchise unsustainable, VTEC might well not have got it in the first place.

 

 

Failed bids are not simply a case of the 'winner' bidding too much In all cases, the DfT has accepted bids predicated on the delivery of enhanced infrastructure and/or new trains, in many cases the responsibility of (nationalised) Network Rail. Any deviation from the promised ehancements damages the revenue base on which the franchise bid was costed, and once the baseline deviates below the proejcted income, it is virtually impossible to meet the relevant financial obligations. Yes, bidders have gor it wrong - but so has the DfT for agreeing a contract with no capacity to cope with anything other than perfect delivery of multiple complex schemes. 

17 hours ago, mdvle said:

 

Which, in the end, is part of the problem.  They are over aggressive in the bidding because they know they can essentially hand back the keys and walk away with no penalty if the numbers don't work.

 

On the other hand, if the franchise agreement was such that they would owe the premiums regardless of whether they operate for the full franchise term, perhaps that would be incentive for them to crunch the numbers more carefully and bid more realistically?

 

 

I'm sorry but this completely misrepresents the reality. Franchises are bonded. No-one can walk away without forfeiting millions of pounds. The fact that in the end the owning groups will forfeit the bond shows just how badly the contract has failed to deliver. It is populist claptrap to claim that franchisees who hand back the contract are let off the hook. The issue now is that the DfT has truly cooked the geese that were laying the golden eggs - an owing group might swallow one multi-million pound loss if they can maintain a portfolio that is overall net positive, but when they all start failing, then (as DfT has discovered) you either end up with no bidders, or one bidder with no competitors who is clearly going to price in this risk. That is why franchising is now dead.

8 hours ago, Joseph_Pestell said:

 

It's surprising how often John Major is seen on TV giving his opinion given that his Govt was so lacking in any strategic thinking. Privatisation was dogmatic based on a strong belief that "BR was deeply inefficient". No evidence was ever produced to back up that belief. And now we find the railways costing the taxpayer far more than they ever did in BR days.

Having started work for BR in 1987, it quickly becae apparent to me that BR was in fact extremely efficient - it was just woefully underfunded. The idealogues confused inefficiency with poor outcomes, one of the benefits of privatisation was to release funding streams that BR could never get hold of but of course it proved that to operate the network properly cost more, not less than BR spent. There is no doubt that with Network Rail now renationalised and the franchise model being (as seems likely) changed to a contracting one that spending will be much ore subject to government scrutiny.