Reform of rail franchising needed, says transport think tank
The current rail franchising system faces significant challenges and may need fundamental changes in the future, according to a new research report.
The report, "Ensuring a Sustainable Rail Industry", has been produced by Credo Business Consulting for a new transport think tank, Tracks. It says that while franchising looks successful, in practice the system is increasingly vulnerable to an economic slowdown. A relatively small number of bidders face increasing risks when bidding for and running franchises. The research also highlights wider problems with the franchising system for passengers who face complex and confusing fares structures outdated ticketing technology, and increased crowding. It also suggests that franchising as currently structured is a barrier to sustained long term investment in the industry, especially on trains and stations.
The report makes various recommendations for reform. Its key proposal is that the Government should set out a clear strategy for the economic and financial role of the railway in post-Brexit Britain, and then revisit how a more flexible franchising model can best support this. It also says the Government should lead a "fundamental and bold review of fares" to remove complexity, make the system more relevant for modern working patterns and stimulate greater innovation and flexibility in stimulating and managing demand.
In addition, the report suggests:
- a greater emphasis on the quality of services offered and long term investment rather than short term finance, and a full assessment of the wider economic and social benefits of bids
- creating a fairer financial structure, giving certainty on future franchise payments, recycling any windfall profits within the industry and ensuring that no franchise becomes "too big to fail"
- creating a better alignment of risks with a common set of objectives for network development, consistency on the nature of competition and greater flexibility to link with longer term changes in travel patterns
- creating a clear strategy for operators and third parties to fund and develop the rail network
- reviewing the financial sustainability of franchises let since 2012, to ensure they can withstand any downturns in rail revenues and wider economic problems
- a potential move away from the standard franchise model towards smaller, different franchising models, including concessions for local rail services in rural as well as urban areas. It says this should be accompanied by further devolution of responsibility and oversight of local rail services to local levels, where rail can become part of local transport networks, though national government should retain overall responsibility for the national railway.
Commenting on the report, Stephen Joseph, Chief Executive of the Campaign for Better Transport which established the Tracks programme, said:
"This report shows the challenges facing rail franchising, especially if there is a slowdown in rail use or in the wider economy. It also sets out some coherent proposals for ways forward, including the need for a clear rail strategy linked to the wider economy and for fares reform. We hope that the next Government, if it continues with rail franchising, takes note of this and finds this research useful."
Matt Lovering, Partner at Credo Business Consulting and the author of the report, said
“The success of franchising has been one of the key factors in the dramatic increase in rail usage over the last 20 years. But this growth has significantly increased the social and economic importance of the railway, making it essential that the network continues to evolve and offer attractive services to all customers. The current franchising model has significant risks and limitations which may hinder this process, We hope that the model will evolve in a way which builds on the successes of the last twenty years but creates more flexibility to meet the needs of different customer segments and respond to the economic, social and technology changes which are anticipated in the years ahead”
The report was published on 3rd May by Tracks, a new transport think tank established by the Campaign for Better Transport and can be downloaded here (PDF 603k).