THE TROUBLE WITH PASSENGER RAIL FRANCHISES

The current franchising regime is fragmented, financially opaque, poor value for money and provides the train operators with no incentive to invest in station upgrades, improvements and enhancements, RMT told the Transport Committee inquiry. The current arrangements have failed the travelling public and passenger franchises should be returned to the public sector as they expire. In the meantime, there should be greater transparency in the franchising process and Invitation to Tender documents should be made publicly available. Moreover, the recent ‘cap- and-collar’ franchise awards continue to expose the public purse to inappropriate levels of risk. Under this strategy up to 80 per cent of any large shortfall – or excess profits – will be borne by government not the private sector. In relation to Greater Western, the formula is that the operator (First) takes the whole risk of the first two per cent shortfall, then half the risk of the next four per cent, but only 20 per cent of the rest. The policy of indemnifying train operators from losses incurred as a result of industrial action should also be scrapped. To date over £23 million has been spent by government in compensation payments. Such financial incentive will only encourage franchise holders to dig in their heels in the hope that they will be indemnified should industrial action result and does not encourage good industrial relations. RMT supports vertical integration of the rail network in the public sector. It is opposed to the private sector taking over Network Rail’s safety and operational powers over the rail infrastructure. Train operators would simply ‘sweat the assets’ for profit, particularly when franchises were coming to end and the existing operators were not on the short-list for the replacement franchise. The union does not want to a repeat of the catastrophic degradation of the rail infrastructure which occurred when Railtrack systematically underinvested in the industry in order to maximise shareholder profits. POOR VALUE A series of reports have supported RMT’s view that the current franchising arrangements are fragmented, heavily subsidised by the public purse, poor value for money, with fare and ticketing structures that are too expensive and complex. A September 2005, Catalyst paper, The Performance of the Privatised Train Operators also pointed out that initial government estimates of the level of public subsidies required to fund the private franchisees had proved to be “hopelessly optimistic”. “These companies (TOCs) are totally dependent on subsidy for their financial survival. They could not cover their operating costs, let alone provide a return to the providers of finance, without generous public subsidies,” it concluded. A May 2006 Transport Select Committee report: How fair are the fares? On train fares and ticketing policy confirmed the RMT’s longstanding view that, 10 years after the break-up of passenger services, the franchises operate a ticketing regime that has been an “abject failure” which is “not fit for purpose”. The time and energy expended drawing up bids to retain franchises is also a distraction from the task of providing a good service to the travelling public. This process has proved expensive as over £60 million has been spent on franchising and re-franchising passenger services. Ultimately, the current franchising arrangements have failed to provide value for money for the tax-payer or the fare-payer. www.rmt.org.uk :: july/august 2006 :: RMTnews 11 THE TROUBLE WITH PASSENGER RAIL FRANCHISES RMT recently gave evidence to the House of Commons Transport Committee inquiry into ‘Passenger Rail Franchising’