How the end of the rail franchise system will affect Britain's trains
Why has the government declared an end to the rail franchise system now?
Since privatisation a train operator’s profit or loss broadly depended on how many passengers they carried. Normal franchise agreements were suspended in March, when the government told people not to travel because of coronavirus. Virtually all rail companies would have defaulted or gone bust under existing contracts this year. Those emergency deals expired on Sunday night, and have been succeeded by transitional “recovery” contracts, or Ermas, while the exact shape of the future rail system is thrashed out.
Is coronavirus wholly to blame?
No – in fact, several companies had already got their sums wrong and were desperately trying to renegotiate terms in the last two or three years, with Virgin Trains East Coast and Northern eventually having to be put into state control, and others facing large losses.
Does this mean an end to private sector involvement in the railways?
Far from it. Had the deals not been reached, the government was set to step in with its own “operator of last resort” on more lines. The contracts instead ensure that rail companies can operate profitably for another six to 18 months while the effects of the pandemic continue, being paid a management fee rather than taking the risk on passenger numbers and fares.
So what are they getting paid for now?
Labour and unions argue that the money, as much as ever, is being sucked out of the system for little reason. However, the rail companies argue that margins are reasonable, or low, while the new contracts are thought to have performance incentives to keep them running trains on time.
What does it mean for fares?
Hard to know. The government’s long-term project to make passengers shoulder more of the expense of rail has been thrust into reverse by the pandemic. Moves to home working might prove permanent and significantly reduce income from daily commutes. The revenue is needed – but in the short term, looking to lure passengers back, the industry talk is more of slashing fares and providing flexible season tickets.
Will there be more rail services?
Most companies will be operating near to full pre-pandemic timetables by the end of the year, with social distancing, even at 1 metre with masks, meaning that the effective capacity is a less than half-full train. In the longer term, if demand remains low and the Treasury subsidy therefore remains high, a cull of lesser-used services seems more likely. Fewer trains – and fewer passengers – have made the railway function far more punctually and effectively.
What will an all-new rail system look like?
On the surface, perhaps not much different – for all that Keith Williams, the chair of the rail reform review, has spoken about putting passengers first. But a desire to end fragmentation might mean bringing Network Rail, which manages the track, and the companies that run the trains closer together, potentially meaning less disruption. The fares system is likely to be simplified, possibly ending confusion over travelling on the wrong service or paying too much – although such ambitions and pledges have been made for a long time now without change being delivered.
