Franchise flashpoint puts DfT under pressure

How many times have you heard the warning ‘buyer beware’ or been cautioned ‘if a deal looks to good to be true, then it is too good to be true’.
I’m finding it hard to escape either as I think about the deal the Department for Transport signed with Stagecoach for Virgin Trains East Coast. Not only did it promise huge sums for the government – £3.3 billion – but it also relied on network improvements that Network Rail had not committed to delivering.
The warnings apply to both sides. I daresay Stagecoach and 10% minority partner Virgin protected themselves against NR but I’m left wondering how thoroughly the Department for Transport checked the deal. It must surely have known that its subsidiary’s enhancement plans were in turmoil amid missed deadlines and rising costs? Surely it knew that enhancements the deal assumed were happening had no delivery dates?
Much of the heat around Chris Grayling’s decision as transport secretary to cut the final three years of VTEC’s deal has surrounded the money the government will now not receive. No surprise, given that the lost money is nearly half the total VTEC promised. Shine a light into this murky story and I think other factors become visible.
Yes, Stagecoach can saunter away from a deal that wasn’t working for the company but I think it’s more relevant to see this as a deal that DfT could not enforce. Had it been able to then Stagecoach could only have escaped by handing the keys back and suffering the loss of reputation that struck National Express in 2009 when it walked away.
It would have been much harder for Stagecoach to then say it planned to throw its hat back into the ring to bid for DfT’s new-look, integrated, track-and-train East Coast Partnership.
Perhaps Stagecoach’s bid was so far ahead of others in terms of the premium it offered that DfT could not ignore it. Very likely, but don’t forget that DfT sets the rules. Having set them, it couldn’t change them. Having encouraged bids including high premiums, it couldn’t change its mind. Stagecoach and Virgin had shown themselves to be litigious when they threatened legal action after they lost West Coast in favour of First in 2012. DfT reversed this decision and probably worried that if they didn’t award East Coast to the pair then m’learned friends would soon be involved.
DfT has since changed the rules. In the most recent franchise competition, for South West services from Waterloo, DfT placed a much higher emphasis on the quality of a bidder’s plans, such that a better plan can win over a higher premium. That’s what apparently happened when First and MTR beat Stagecoach.
What of other deals signed by DfT around the same time as East Coast? Arriva won Northern and First won TransPennine Express with both starting a year after Stagecoach took over East Coast. Lord Adonis took to Twitter to suggest that First was talking to its lawyers amid talk that TPE was losing money. RMT repeated them as it took full advantage of the DfT’s crisis – although I can’t see that a government crisis is a good reason for nationalisation.
First certainly put together an ambitious bid for TPE. It sees rising premium payments, such that it will be paying DfT £179 million in its final year. Whatever it’s thinking behind the scenes, in public First is saying it’s not called in lawyers but does admit that passenger numbers are behind projections. At this point, regular peak passengers might be wondering where any more people could be carried.
However, TPE expects its growth to come from bringing new fleets into service with more coaches and more seats. Filling these extra seats will be key to First making the figures work. Given how busy today’s trains are and how busy the M62 is, filling them shouldn’t be impossible. There’s demand the railway can’t yet satisfy.
First’s test will come in a few years when it has its extra trains. Until then, it’s wise to concentrate on delivering its franchise.
Northern has its own new fleets on the way and will need to fill the extra seats that result. It also has problems because it’s embroiled in a bitter dispute with the RMT about how it plans to deploy staff. Not that it’s revealed much about these plans, nearly two years after it took over. Under its relatively new MD, David Brown, it needs to be much more open. It will not convince people by keeping quiet.
At DfT’s behest, it must introduce driver-only trains. DfT specified that from 2020 at least half of Northern’s passenger mileage should run without the need for a second member of staff on board. I hear but don’t yet have concrete proof that Arriva bid on the basis of a much higher proportion of driver-only trains. It can’t blame DfT for this.
The RMT portrays its DOO battle as political. This raises an interesting question for Grayling: Does he want to be beaten by a left-wing trade union? If he doesn’t, then he may well have to help Northern. But if he has to help, then he’ll be admitting that franchising has some glaring flaws.
Chief of them is that franchising appears to be a one-way deal. Doubtless, there are bidders, even winners, that carefully examine what DfT wants, carefully consider how to deliver this and bid accordingly. There are also bids that go gung-ho to win at any price. They can get away with this because the DfT usually changes its mind once a franchise in underway. Change invites renegotiation and renegotiation changes premiums and lets foolish franchisees off the hook. Once again, I can’t see that nationalisation will help solve the problems DfT causes when it changes its mind.
Now it seems that Grayling is to throw all the pieces into the air with future deals based on joint working with Network Rail. This will be interesting because I can’t help thinking that NR interprets the phrase ‘joint working’ as ‘our way’. I can see sparks flying when this buts against the commercial world.
I’d be more convinced if DfT could point to any successful alliances between NR and train operators. There was one for South West Trains but it collapsed amid financial arguments. With NR now under even tighter government financial control, and subject to annual spending limits, there will be even more scrutiny and less room to manoeuvre. Any hint that NR’s public money has crossed internal walls within an alliance to train operators will be frowned upon.
Grayling’s rail strategy points to Scotland as the example of alliancing success. Here ScotRail has just introduced electric trains to its main Edinburgh-Glasgow route but it had missed two deadlines already after NR failed to complete electrification on time. These electric trains are very welcome although ScotRail is temporarily using Class 380s in place of Class 385s which have not arrived soon enough.
Performance is improving but has a way to go to reach its target for the end of the year. For all this, Scotland is more likely to make an alliance work than is an East Coast Partnership. That’s simply because the geography is simpler. Only two lines cross the boundary and its funding and network specification are set locally by Scottish ministers. ECP will have complex boundaries and the East Coast TOC will be a minority operator along many sections of the route.
That’s not to say the idea won’t work but it will be complex and difficult. What sounds great in Whitehall may yet translate into a headache for those trying to run the railway. I’d even hazard a guess that Stagecoach will see its VTEC franchise extended beyond 2020 as DfT struggles to turn Grayling’s idea into a workable invitation to tender. Not least because it has plenty of other franchise competitions in the queue and they keep slipping right.

This article first appeared in RAIL 842, published on December 20 2017. Postscript: Stagecoach lost its East Coast franchise later in 2018 when government nationalised East Coast.

The hunt for DfT’s rail strategy

Strategy and policy are inextricably linked. The first is a reaction to the second. Decide your policy, then the strategy that delivers it and, finally, plans to implement.
According to the DfT’s website, government transport policy is: “Safe and dependable transport is essential to UK society and the economy. The government is working to make rail, road, air and water transport more efficient and effective, keep them safe and secure, and reduce greenhouse gas and other emissions.”
In turn, DfT’s rail policy says: “We need a modern rail network to support economic growth and productivity, and to help people get around quickly and safely.”
This is rather wooly. In broad terms, it’s hard to disagree. Yet it is also hard to explain what successful implementation would look like. Strategy has long been considered the stuff of military campaigns. Here policy can be simple. Most schoolchildren could explain what Churchill wanted to achieve in World War 2. His policy was to win. The strategy to achieve this was more complicated but essentially boiled down to holding his adversary at bay for long enough to build allied forces to a strength with which they defeated Berlin’s forces.
DfT’s policies can never be as simple as Churchill’s but it’s notable that its rail policy doesn’t fully follow wider transport policy. There’s no mention of rail reducing its greenhouse gas emissions despite rail being widely touted as environmentally friendly. Many passenger-miles rely on burning diesel and with electrification falling from favour with Whitehall, this looks set to continue.
Indeed the only mention of the word ‘fuel’ in DfT’s recently published ‘Strategic Vision’ comes in a small box panel that suggests that digital technology will help fuel efficiency. The technology in question – Connected-Driver Advisory System (CDAS) – certainly should but it’s small beer compared with the difference wider electrification could make, if only Network Rail could bring the cost of installing catenary downwards. Hydrogen (RAIL 838) could make a difference but there’s no convincing incentive to develop it without a clear government policy calling for lower emissions.
Of course, a wooly policy cannot fail. If success cannot be measured then failure cannot occur. That always appeal to politicians without clear convictions. But there’s something rather dispiriting about avoiding failure rather than celebrating success.
UK rail can celebrate its safety successes. They have been hard-won and have come by learning the hard way with a series of fatal accidents. Look through DfT’s ‘Strategic Vision’ and you’ll find no clues about whether today’s safety is sufficient or whether ministers wish it to further improve. In this, the document reflects last summer’s High Level Output Specification (HLOS) that set no safety targets.
Nor did DfT set performance targets despite acknowledging that delays infuriate passengers. I can’t argue with the strategic vision’s claim: “Evidence from the passenger watchdog Transport Focus shows that passengers put a high priority on reliability and performance. Disruption to services, and frustration when it is handled badly, are the top drivers of dissatisfaction.”
But no targets. This might be classic Conservative laissez-faire but it’s not helpful to those planning the rail network or to those holding it to account. So we have HLOS saying: “The Secretary of State does not propose to set national top-down performance targets. He believes that the best way to deliver performance will be for Network Rail, through its devolved Route structures, to work closely with train operators and representatives of the end users of the railway to determine appropriate metrics and stretching yet realistic target levels for each part of the network.”
It makes you wonder just what DfT is buying for the £47.9 billion it said last October would be available for the 2019-2024 period (of which £34.7bn will be Network Rail’s grant). Fortunately, HLOS is not entirely empty. It does specify peak arrivals capacity into major English cities which at least gives planners something to aim at.
There’s an argument that providing freedom is a sign of a mature relationship. It shows you trust your subordinates to make the right decisions when confronted with choices. I could understand this if NR had a good track record of delivery. I could understand this if passenger feedback was rating train operators highly. However, subordinates need to know what you’re aiming at if they’re to make the right decisions.
Instead, DfT appears to be concentrating on inputs. By providing more money for renewals, for example, it seems to think reliability will increase. So it should although it must be said that NR’s recent renewals performance has left much to be desired. We’ve recently heard talk of redundancies while work stacks up. In any case, knowing what DfT wants at a top level will help NR decide where to concentrate resources regionally to allow those devolved route managers to then decide how best to use their allocation. Perhaps this is happening internally but with DfT refusing to reveal what’s in the rail industry’s initial advice for 2019-2024 (unlike the Scottish government) it’s hard to know. This leads me to think that DfT only wants transparency when it applies to others and certainly doesn’t want to be pinned down as responsible for its actions.
DfT is certainly concentrating on inputs when it decided to change the way NR and train operators work together. It wants closer working with joint teams responsible for track and trains. It notes: “When things go wrong, energy and time which could be spent on solving the problem can be lost in contractual debate and industry dispute processes.” This was the sort of criticism levelled at rail companies many years ago and something the industry has done much to counter with integrated control rooms concentrating on fixing problems and recovering timetables. That said, things still go wrong, such as December 7’s Hull Trains failure that stranded passengers on a failed train for several hours just north of Peterborough. I suspect integrated working was not the problem here but, more likely, a lack of prompt and decisive action.
Not that DfT has helped integration in the past when it set different targets for track and train to deliver at the same time. That might be an argument for DfT setting no targets but it would be better if it set consistent targets.
Hence the DfT is having another go at creating alliances between NR and train operators. It cites the close working between NR and Great Western Railway but this didn’t stop NR springing at the last minute a weekend closure of Reading on GWR last autumn. That’s hardly close working and it’s hardly putting the passenger first. A sharp letter from Transport Focus Chief Executive Antony Smith noting the late release of timetables and tickets for Christmas is another example. “I am becoming increasingly concerned about the impact on passengers of late notice requests for engineering access.” He gave a specific example: “On October 9 the full normal timetable for Wednesday 27 and Thursday 28 December was showing for Paddington to Cardiff journeys – days on which Paddington station is closed – without any warning that incorrect information was showing”.
First/MTR and NR have signed a South Western alliance. To date, this seems to consist of the operator taking the criticism for NR’s seemingly daily track circuit and other failures on the approaches to Waterloo.
DfT would be better to publish what it wants rail in England to achieve. It should concern itself less with structures than with setting goals. If those goals are consistent between NR and train operators then both sides will have incentives to work in the best way that delivers the results that DfT, passengers and freight forwarders want.

This article first appeared in RAIL 843, published on January 3 2018.

Turbulence ahead for West Coast bidders

To say the Department for Transport has set a major challenge with the next West Coast franchise is a gross understatement.
The winning bidder will need to take over today’s long-distance services from London Euston, run them punctually on a busy mixed-traffic route, providing modern facilities at stations, while also finding space on the trains for more seats and more space for luggage, prams, wheelchairs and bicycles. It will also need to work with HS2 to launch and initially run London-Birmingham high-speed services, before extending them to Crewe, while reshaping remaining classic services.
That’s a huge challenge. Equally challenged will be DfT itself. It has a poor record in franchising and will be glad it’s not fined for delays in the way it fines operators. Take the most recent version of its franchise timetable from last July. This schedule said West Coast bidders would receive their invitation to tender in November 2017. It finally landed in their inboxes in late March 2017. The new franchise was to start in April 2019. It is now scheduled for September 2019.
The last time the DfT tried to franchise West Coast, it ended in embarrassment. It awarded the contract to First Group in 2012 but found itself on the receiving end of legal action from Virgin and Stagecoach which forced it to reverse its decision. Virgin/Stagecoach has been running the route ever since and is now in line for another extension. The pair’s extensions are now as long as most normal franchises.
Glance over at the other Anglo-Scottish main line. Here DfT signed a deal with Stagecoach and Virgin that was crippled from day one because DfT had not accounted for changes in the economy. That’s hardly a good record from ministers and civil servants in Whitehall. Now they’re presiding over attempts to let the most complex deal UK rail has ever seen.
The winning bidder will take over just as Britain crashes out/leaves gracefully/stays in* the European Union (* – delete according to your view). Whichever option you chose, no-one can confidently predict the effect on the economy. And it’s the economy that has more effect on train operator finances than anything else.
The DfT appears to think Britain will be booming. Buried deep within its West Coast invitation to tender (ITT) is a table of what the DfT’s calls ‘baseline payments’. Essentially, they are the minimum it expects to see from bidders and will be adjusted by the effect of bidders’ plans. They start at £125m for the franchise’s first few months to March 2020, kick-up to £229m for its first full year and then jump to £402m for the final year before HS2 operations start in 2016. By my reckoning that’s a compound annual growth rate of almost 12%. OK, inflation will blunt some of that rise but it’s what BBC’s Yes, Minister might have labelled ‘brave’. For context, Office of Rail and Road statistics report that long-distance passenger revenue has grown 3% since 2012.
The winner must also contend with Euston station being demolished around it. This has real potential to divert passengers for Scotland to King’s Cross and the East Coast route. Passengers for the West Midlands have the option of switching to Marylebone for Chiltern’s line to Moor Street. Planning a franchise to bring considerable growth during disruption will not be easy.
In essence, the next West Coast franchise will be two. The first is a conventional franchise, the second is a concession to run HS2 services with DfT taking the revenue risk. This DfT decision is sensible. If it’s hard to predict the next eight years to 2026, then predicting how passengers will react to HS2 is impossible from here.
In asking for bidders’ ‘Shadow Operator’ plans for HS2, DfT is looking for how they will apply their experience to creating and staffing high-speed services and in advising HS2 in procuring its fleet. (All three bidders have partners with experience of high-speed rail.) This is possibly the wooliest section of the ITT, not least because it refers to a franchise agreement that DfT has not published. Nevertheless, it’s an area bidders must get right because it’s worth a third of the total quality score available.
By contrast, bidders’ plans for taking over and running existing West Coast services run to 44% of the total available. DfT is placing increased emphasis on plans compared with previous competitions. It scores bids on a combination of the premium bidders offer and the quality score (maximum 13) it gives their plans. It adds the premium measured in millions to the quality score multiplied by a factor. This factor is called ’n’. For West Coast, n is 250. In 2016’s East Anglia competition it was 33 and in 2014’s for East Coast it was 25. This means that it’s easier for a good plan to trump a premium. It seems DfT has listened to criticism that it’s only interested in money and was taking shaky bids on the basis that they promised impressive cash sums.
The bidders – First/Trenitalia, MTR/Guangshen and Stagecoach/Virgin/SNCF – now face a frenetic couple of months pulling their plans together before DfT’s July 13 deadline. I don’t envy them!

This article first appeared in RAIL 850, published on April 11 2018.

Chaos comes from changing plans

Order. Counter-order. Disorder. They might be the makings of military disasters but they apply firmly to railways in Northern England.
Most of the disorder flows from governments changing their minds. Privatisation started by keeping British Rail’s organisation of a passenger operator on each side of the Pennines. They later merged while express services were split into a new company.
The Pennine split remains under the surface of today’s Northern, not least because drivers on each side still have very different terms and conditions and receive different pay despite driving similar trains on similar services. Combining the two will surely make the railway more expensive because there’s no union that would agree to ‘level down’ pay. There’s little point in trying because you could be sure that the next reorganisation would split Northern in two once more.
The unified Northern started in 2004, launched as a franchise that would run little trains and see no growth. Leeds and Manchester had different ideas. Their economies boomed and people flocked to trains because they were the quickest way into city centres.
The north’s express operator, TransPennine Express, tried to turn itself into an inter-city operator, ordering new trains from Siemens. They came as three-car units and quickly filled. Government blocked moves to add a fourth coach in a short-sighted decision that made crowding worse.
Pressure continued growing and so the Department for Transport hatched plans in 2008 to replace part of Northern’s fleet of Pacers and Sprinters with new diesel trains. It promised an extra 158 diesel vehicles.
They never arrived which justified Transport Focus Chief Executive Anthony Smith’s comment about the original announcement in RAIL 585’s news coverage. He said DfT’s work looked like it had been: “pasted together overnight”. He added: “It might be a strategy but it’s not a plan.”
It wasn’t even a strategy because the DfT soon turned away from diesel to embrace electrification. In 2007, DfT’s Rail Technical Strategy said of the future: “Many trains will be capable of ‘bi-mode’ operation, drawing electricity from the wires where available but running on portable fuel where not. Battery technology will have advanced and may be capable of supporting rural services in combination with discontinuous electrification, avoiding the infrastructure costs associated with electrification in tunnels and in complex areas.”
By 2012, it had reversed this position and planned to electrify the trans-Pennine route between Leeds and Manchester via Huddersfield and onwards to York as well as a triangle of lines between Manchester, Liverpool and Preston.
It wasn’t long before DfT dropped that plan. It had badly underestimated the costs and difficulties of embarking on a massive electrification programme from a standing start. Network Rail and the industry couldn’t cope and projects began to run late. NR’s failures with its Great Western programme grabbed most of the headlines, and did most to extinguish ministers’ enthusiasm for overhead wires, but it did deliver Liverpool-Manchester to let Northern run Class 319 electric trains cascaded from London. London’s commuters were pleased to see them gone but they were a revelation for Northerners used to Pacers.
Today, we’re back to 2007 and that quote from the Rail Technical Strategy could easily pass a minister’s lips today with Windermere’s electrification shelved and other schemes pushed back to far as to be invisible.
Subtle changes marred plans. NR remodelled Stalybridge to form an eastern terminus for electric trains to relieve pressure on Manchester Victoria. DfT then cancelled the plan to erect wires to it, increasing Victoria’s pressure because it would now have to receive terminating trains from two directions.
NR found poor ground conditions when wiring Manchester to Preston via Bolton which delayed progress. This became a key factor in Northern’s recent timetable meltdown (RAIL 854) when Northern had to ditch its timetables that assumed NR would deliver this scheme in line with its latest promises.
Yet these are tactical problems. Above them all is DfT changing its mind and changing its strategy. Northern’s passengers could have had new diesel trains years ago had DfT stuck with 2007’s plan. These trains could have provided extra capacity, helping solve the overcrowding that’s blighted the operator for over a decade.
There is some good news ahead. Northern and TPE are receiving new electric and diesel trains. They’re being tested now and will be in service soon. They should make a big difference.
I’m sure passengers will welcome them. So will ministers. Not least because they’ll disguise the years of order, counter-order and disorder that have blighted Northern England’s railways. RAIL readers will know better.

This article first appeared in RAIL 855, published on June 20 2018.

Railways cannot afford failure

We believed we could do it. Those words sum up the glorious failure of May’s timetable.
They evoke a welcome spirit of trying but ultimately failing. But running a railway is not like a kick-around on the local pitch. There is no place for a plucky loser. Rail companies have promised much for many years. They must deliver.
June 18 2018’s grilling by MPs of several senior railway managers prompted as many questions as it answered. It generated the claim from Network Rail System Operator Managing Director Jo Kaye that the railway thought it could deliver May’s timetable. It revealed that Northern Managing Director David Brown only realised the meltdown was coming a couple of days before it.
Yet it also revealed that Northern had tried back in January to have the timetable change postponed. So it clearly realised it couldn’t deliver the change. That doesn’t explain why it did so little to prepare its crews for the new timetables it had suggested to NR. The track operator might need to change some of Northern’s proposals to fit around others but Northern should have planned crew training around its timetable plans rather than waiting for NR to respond.
Down south, local NR route managing director, John Halsall, told MPs that there had been a tiny moment last November in which to postpone GTR’s timetable change. (May’s timetable changed the timings of every one of its 3,000 daily trains.) NR and the operators didn’t take this chance because, according to Halsall, they believed they could deliver.
Fast forward to May 4 2018 and the industry readiness board examining Thameslink gave a red risk rating to the timetable change that was to take place in just over a fortnight, according to GTR Chief Operating Officer Nick Brown. By then it was too late to change. Ditching a timetable change as large as GTR’s would have put several other operators’ timetables up in the air, depriving their passengers of improvements they’d been promised.
And, as Nick Brown noted, if the railway stopped every time it saw a red risk flag, it would never get anything done.
GTR simply ran out of time to finish its planning, Chief Executive Charles Horton told MPs. At Northern, David Brown also admitted that there hadn’t been enough time. Jo Kaye recommended never trying to compress timetable planning again.
Horton had quit a few days before his appearance before the Transport Select Committee. This shows a welcome level of personal responsibility in an industry that has shifted from individuals being responsible to having committees holding joint responsibility. That’s part of the problem. Committees can’t hold responsibility. That became clear as MPs tried to find out who decided not to postpone Northern’s change last January. At first, Brown was coy but MPs pushed and he eventually said it was train operators and Network Rail’s System Operator that decided to reject postponement and push on.
Responsibility shared is responsibility avoided. You can imagine meetings in which the person with the problem keeps quiet, not wanting to admit anything, and relieved when the committee decides to press on. Relief, the committee says it’s ok, it’s not my fault anymore.
This gave the Transport Select Committee a challenge. It could find no smoking gun. It exists to hold DfT’s ministers to account but, from what the senior railwaymen said, there was little to counter the transport secretary’s assertion in Parliament on June 4 that he wasn’t aware of the scale of the problem.
Standing that day at the government despatch box, Chris Grayling said: “The Department received advice from the Thameslink readiness board that, while there were challenges delivering the May 2018 timetable—namely, the logistics of moving fleet and staff—a three-week transition period would allow for minimal disruption. My officials were assured that the other mitigations in place were sufficient and reasonable. Indeed, as few as three weeks before the timetable was to be implemented, GTR itself assured me personally that it was ready to implement the changes. Clearly this was wrong, and that is totally unacceptable.”
Of course, this begs the question of why he and his officials didn’t know of the scale of the problem, particularly if Brown was right when he mentioned the red risk. It’s hard for Grayling to escape responsibility. His DfT owns Network Rail, it let GTR’s operation as a management contract specifically because it was going to be difficult to deliver and it’s part of Rail North that oversees Northern having specified and let the franchise. It alone has sight of all English franchise plans. DfT sits at the centre of the rail industry with its fingers in all the pies.
Having been badly stung by May’s timetables, there’s talk that Grayling wants no changes in December. I can see why. He can’t have much confidence in NR and train operators.
NR is doing its best to dampen expectations. Jo Kaye told the transport committee MPs that it was asking train operators to look again at their ambitions for December and added that she wanted the Network Code revised to limit the number of changes that one timetable could deliver.
The problem with this is that train operators have signed contracts with the DfT that promise improvements on certain dates. TransPennine Express, for example, has promised direct trains between Liverpool and Glasgow from December. If Chris Grayling wants no changes, then he will have to alter contracts.
South Western Railway has major changes coming in December, including the return of Class 442s, running Portsmouth Direct services. SWR describes December as “a huge part of the plan to provide much needed extra capacity and faster journeys.” Passenger consultation scaled back some its ambition, spokesman Jane Lee told me, adding that SWR was now waiting to hear back from Network Rail having submitted its proposals.
With the first Class 442 now fresh from overhaul, driver training has started with guard training due to start in August. And the company isn’t relying on Network Rail to deliver any infrastructure changes, she added.
Unlike Great Western Railway where NR has several December deadlines to extend electrification. NR’s March update to its enhancement plan shows December as the date for wires to Newbury, Cardiff. GWR needs these changes – its Hitachi trains perform better under wires than on diesel as my colleague Richard Clinnick discovered on a recent trip to Swindon (RAIL 855) – but spokesman Dan Panes told me the associated timetable changes were due in February 2019 rather than December 2018.
Were I transport secretary, I’d want managing directors from train operators and Network Rail to explain in public how they propose to deliver their December promises. Assurances behind closed doors won’t do. Passengers need to hear from individuals. Those MDs need to stand up and be counted. Equally, if they can’t assure passengers that all will be well, then Chris Grayling needs to be just as clear in saying that he has, or has not, agreed to improvements being delayed.
We cannot repeat the situation where DfT delayed decisions so long that it left others with insufficient time to implement those decisions. If a TOC MD stands up in July, for example, and says December can’t be done, then DfT cannot wait until October before refusing permission and forcing change through.
June 19 2018 saw Chris Grayling again at the despatch box, this time as MPs formally debated whether they had confidence in him (a majority did). He said: “We will not go through with a timetable change in December that is not deliverable. A lot of working is being done right now to see what can and cannot be done. These problems cannot and will not be allowed to happen again. We also have new leadership at Network Rail. Andrew Haines, its new chief executive, stewarded the last major timetable change on the south-western network a decade ago, which went very smoothly. Andrew will be personally responsible for ensuring that any timetable change is deliverable.”
That’s pretty clear. But I don’t detect much trust in DfT. It controls too much of today’s railway for it, and its secretary of state, to stand aside amid turmoil. It cannot stay above the fray and yet meddle within it.

This articles first appeared in RAIL 856, published on July 4 2018.

How do you fix a problem like rail franchising?

What to do? How to fix a broken railway?
The answer rather depends on how broken you think the railway is. It’s caught many headlines and, yes, it has made many people’s lives a misery since timetables changed in May at Northern and Thameslink.
Elsewhere trains continue to run and Network Rail continues to operate, maintain, renew and enhance the network. There have been delays resulting from the hot weather we’ve otherwise been enjoying. It’s led to speed restrictions to reduce the risk of tracks buckling as rails expand in the heat (their temperatures have topped 50oC in places). It seems to have adversely affected Hitachi’s IEPs running on Great Western. Whatever the reason, hot weather delays trains.
East Coast services between London and Scotland now run under London North Eastern Railway rather than VTEC. The transfer went without a hitch. Teams from various companies have been finishing their bids for West Coast and thrashing out their ideas for Midland Main Line services. They bring their own ideas to satisfy the DfT’s demands for better services and have VTEC’s financial miscalculations as an example of what can wrong.
Meanwhile, there’s plenty of pressure from politicians on the DfT to strip Govia Thameslink Railway (GTR) of its franchise. Readers will know that GTR has a management contract with DfT rather than a franchise and with this contract comes tight control by the DfT, which pays GTR a fee to run trains and receives all its income in return. With this tight control comes little point in stripping GTR of its deal. Ministers might consider that GTR’s presence keeps some of the heat off them in a way direct control would not. Then again, the roasting ministers receive from MPs and others might persuade them they couldn’t be worse off.
The fundamentals of a railway that governments specify and private companies deliver isn’t broken. But it doesn’t work if governments accept unrealistic bids. Nor does the railway work if governments set Network Rail unrealistic goals. The key is realism. And realism depends on knowledge and experience.
I doubt some of those advising ministers have sufficient knowledge and experience. And those that do must fight a civil service mentality of preferring to tell ministers what they want to hear rather than what they should hear.
None of which reduces pressure on ministers to do something. Transport Secretary Chris Grayling has already overseen Network Rail’s appointment of Andrew Haines as chief executive. Haines is unique among NR chief executives in having run a railway. Departing chief, Mark Carne, for all his qualities could not bring this but he had a tough chief operating officer in Phil Hufton. Unfortunately, Hufton is absent ill and insiders tell me that his absence is noticeable in performance figures.
Not that performance features particularly highly on NR’s list of things to deliver. Look at Scotland and NR’s scorecard reveals that ScotRail punctuality comprises only 10% of NR’s overall score for the country, competing with safety, finance, investment and asset management. Of course, all these factors have their place and I’ll admit that it’s fiendishly difficult to separate and rank each of them. But when you consider that Anthony Smith at Transport Focus never tires of saying that passengers’ top three priorities are punctuality, a seat and value-for-money, is 10% enough?
Take a look at NR’s scorecard for London North Eastern and East Midlands route and you’ll see that GTR’s delay minutes form just 1% of its overall weighting. At least for this route, train operator performance accounts for 40% of the total weighting, chiefly because it has several large operators such as Northern, East Midlands and LNER. Each accounts for 8% of the total.
But back to ministers. They could split Network Rail’s System Operator into an independent body. When I interviewed Managing Director Jo Kaye last November, she argued that it was not yet time but admitted that as Britain saw more infrastructure managers as well as NR, it could eventually become independent.
The System Operator has caught much of the criticism for failing to produce timetables for Northern and GTR in sufficient time even if the root causes were late decisions by the DfT and late electrification by NR. Standing as an independent body might allow it the space to warn of the consequences of late delivery. It could better advise on strategic capacity improvements from a position of independence.
I might have suggested putting it under the Office of Rail and Road’s umbrella had that body not lost its voice over recent years. It could have formed a third part of ORR’s rail work, standing alongside its economic regulation functions and its safety arm (the part of ORR that does have a voice with its chief inspector, Ian Prosser).
Ministers should split DfT’s franchising functions to leave the department doing policy and the franchising body procuring. It might even put franchising and system operator under a single roof but this combination would need to be very transparent if it’s to gain trust from train operators.
Splitting franchising would be to admit that DfT career civil servants are not the best people to design and deliver franchises. The new body would need to be staffed by people with experience of running railways from train and track backgrounds so that they grasp the art of the possible. But they should not be its entire staff because it’s important that railways move forward and pressure from franchising competitions does force bidders to rack their brains for new ideas.
The move would force ministers and their civil servants to step away from close control of rail. When you’re vexed by daily complaints, this is hard to do. But once rail recovers from its timetable meltdown, it will be the right thing to do. It will allow ministers to properly hold the railway to account without also being complicit. Who knows, one day transport ministers might be statesmen.

This articles first appeared in RAIL 857, published on July 18 2018.

Whitehall is pushing rail down the wrong track

Any pamphlet entitled How to be a minister is likely to have a limited audience. But that hasn’t stopped the Institute for Government with its latest primer on taking infrastructure decisions.
It’s a complex area with responsibilities divided across eight government departments (each with a cabinet secretary of state) and 18 ministers under them (and that’s just the UK government, in Scotland and Wales there are more departments and ministers looking at infrastructure).
Rail infrastructure sit most clearly under the Department for Transport but four other departments have their fingers in rail’s pie. The Treasury controls money so has huge influence over Network Rail and big spending projects such as Crossrail and High Speed 2. The Business, Energy and Industrial Strategy (BEIS) department is responsible for policies surrounding the rail supply chain. The Ministry of Housing, Communities and Local Government holds some responsible for High Speed 2 and the Northern Powerhouse. Finally, the Cabinet Office oversees the Northern Powerhouse and Midlands Engine.
Nothing can be done in isolation and nothing can be done simply. Almost by definition, major projects cut across several areas and will provide benefits and cause harm to different degrees to different populations.
As the institute notes: “Ministers should appreciate the uncertainties, risks and assumptions that underpin the evidence presented to them. They should be aware that cost benefit analysis is more than a single, monetary figure: the analysis should produce a range of benefit-cost ratios that a project is likely to achieve, their relative likelihood, and a summary of impacts that cannot be monetised but should still be taken into consideration. This should be backed up by sensitivity and scenario analyses, which highlight the assumptions underpinning the results and what would happen if these assumptions changed. It should clearly outline the risks remaining and what steps need to be taken to manage them.”
Ministers need to understand the evidence for a project and be able to clearly explain their decisions. I’ve quizzed a few ministers over the years and, in general, they are far better at explaining decisions than the bland statements their press offices produce.
Of course, there’s a balance between ‘rolling the wicket’ to create favourable conditions for a certain project and announcing that project. Ministers should be atop their rollers before the full costs, benefits and harm of a project are known but they should smartly and openly dismount if projects fail to reach their early promise. There’s a real risk in announcing something before its costs are settled as shown by the Great Western electrification project.
Its £1.1 billion go-ahead came from Prime Minister Gordon Brown back in July 2009 (RAIL 623, 624), aided and abetted by his transport secretary, Andrew Adonis. Both lost office within a year but David Cameron’s coalition government took the project forward. However, its cost estimates proved woeful, bills spiralled upwards, delivery dates came and went and parts were lopped from the project. Today, nine years later, the project is still not complete with electric trains only running to Didcot, far short of their Oxford, Cardiff and Bristol targets.
The rail industry had been rolling its electrification wicket, slowly convincing ministers to change their department’s position. It changed very dramatically, not just with Great Western’s announcement, but also with 2012’s High Level Output Specification that proposed a massive electrification programme to be delivered in 2014-19.
Once again, it was a prime minister that announced the plan in July 2012 that would see the Midland Main Line electrified, and wires for a freight link between Southampton and the West Midlands, Cardiff Valleys and over the Pennines (RAIL 701).
It was heady stuff but also more than the railway could deliver. I recently asked an old Network Rail hand why he thought government had jumped at so much electrification. “Shiny things,” he said. But he added that NR had advised that the programme by delivered over a decade rather than five years. Ministers ignored, or didn’t hear, this advice. Had they taken it, then it’s likely the railway wouldn’t be in today’s electrification mess.
The Institute for Government comments: “Yet ministers continued publicly to state their commitment to electrification, locking themselves and their successors into targets that were very unlikely to be achieved. This has reduced the credibility of ministers and damaged government relationships with regional government, mayors and industry.”
There’s much ministers can do to cut across Whitehall’s silo mentality. They are more likely to know their opposite numbers in other departments than are civil servants. This should result in policy implementation being better co-ordinated. The institute’s pamphlet sums this up in a quote from former minister, Ed Vaizey: “It struck me as really odd, for example, that the Department of Transport was in charge of getting wifi onto trains when all the expertise about doing that effectively rested in my department… there were huge opportunities for synergies which were lost.”
Meanwhile former Transport Secretary Alistair Darling noted: “As in everything else in life, there is no substitute for sitting down over a cup of tea or a drink and discussing something. But you then need to have some formal proceedings to make it happen.”
There are examples of departments working well together. DfT’s Crossrail project created a tunnelling academy to develop skills knowing they were very likely to be needed for several other schemes including HS2, Thames Tideway tunnel and Crossrail 2.
Rail now stands on the brink of the next five-year control period. NR’s funding will concentrate in operating, maintaining and renewing the network. Enhancements have been removed in a change from previous control periods. They will now be put through their own development pipeline with only properly developed and affordable proposals receiving funding. That’s a reasonable reaction to the time and cost overruns seen on Great Western.
The same policy applies in Scotland but there it divides from England and Wales. Scotland has published the rail industry’s initial advice to ministers on what problems need enhancements to fix them and what potential fixes could be delivered. DfT meanwhile has kept this advice secret and seems keen to prevent passengers and stakeholders knowing what might be done to fix overcrowding or poor punctuality.
Secrecy is increasingly this UK government’s preferred way of working. It prevents people clamouring for particular projects, which makes life easier for ministers, but also prevents any ‘wicket rolling’. By the time DfT launches any public consultation, there’s usually only one option on the table and there’s rarely evidence to show that this is the best option.
It smacks of Whitehall knowing best which contrasts sharply with the devolution government professes to support. DfT should be more open about the problems the railway faces. It should be more open about potential answers. Some may be unaffordable but openness allows these problems to be discussed. Ministers have more chance of convincing passengers of the difficulties of solving overcrowding, for example, if they engage in the debate.
Instead we have vacuum. Network Rail has sent its Trans-Pennine upgrade report to the DfT. It remains unpublished while civil servants pore over it. It would be better published so that people can see how the route could be upgraded and at what potential cost. NR doesn’t have a monopoly on right answers and publishing its report provides an opportunity for suppliers and contractors to comment to refine and sharpen the report’s proposals. Publication allows passengers, train operators and local businesses to comment on what’s important to them, further refining and sharpening its plans.
Few disagree that ministers retain responsibility for public spending. Decisions about using that money to upgrade the trans-Pennine route remain with them. Publishing NR’s report is not a commitment to implement its recommendations. But it will show that the DfT and its ministers are serious about improving the route.

This article first appeared in RAIL 858, published on August 1 2018.

Uncertainty beckons for rail franchises

Change is coming to rail franchises. Quite what is open to question.
Until now, franchising has been relatively simple. The Department for Transport or Transport Scotland runs competitions for a group of services roughly along the lines of the train operating units created by British Rail in the run-up to privatisation. They score bids on the ideas they contain and the premium offered or subsidy needed. The winner then runs trains for a set period.
In general terms, this system has worked. In the 20 years since privatisation, four franchises have failed. The problem is that three of those failures were running inter-city services on the East Coast Main Line. Two failed because the winning operator didn’t attract the growth it thought was there.
Hard then to blame Transport Secretary Chris Grayling for saying he doesn’t want to franchise East Coast in the same way again. After all, that’s one of the definitions of madness.
No-one knows what he does want to do although he told MPs in late July 2018 some of his initial ideas: “I think there are benefits from public-private partnership. We are not intending to sell off this railway lock, stock and barrel. Its future will be as a public-private partnership. It will not be a fully private company outside government with no state involvement at all. My aim is that it should be public-private partnership but in a different form than has taken place up to now. The example would be bringing in private capital to invest in digital signalling as part of the partnership, and an employee stake in the business. These are the things we are working through now.”
He admitted that East Coast was not the ideal place to try creating a track-train partnership. Current train operator, LNER, is a minority user of the route, which is a busy mixed-traffic railway. Thameslink and Great Northern (both part of GTR) run outer and inner-suburban trains at its southern end. (Grayling talks about switching Great Northern services to be part of LNER.) East Midlands Trains scoots between Peterborough and Grantham. North of York, there are plenty of CrossCountry and TransPennine Express services. The line is a key route for freight operators too.
Putting LNER in the driving seat on a line so many operators depend upon will need many safeguards for those other operators.
But Grayling is pursuing his ideas because circumstance has returned LNER to the public sector. “It is common sense that the more we can integrate the teams so that they work together, the more likely the railway is to be able to respond properly to the challenge it faces. What we have to establish with the east coast partnership is exactly what form it should take legally. What I really want on the east coast is somebody in charge able to take decisions about planning maintenance works alongside the interests of passengers and to make sure that the two fit side by side, and dealing with problems when they arise so that services get back to normal as quickly as possible. It is about creating a joint approach to the running of the railway, given the pressures on it,” he told MPs.
Knitting track and train together will need Network Rail to trust its local managers more than it has to date. It has talked about devolution but remains very centralised. Not least with its Infrastructure Projects (IP) division that has been responsible for many problems in recent years. It was behind the engineering overruns that blighted passengers at King’s Cross and Paddington a couple of years ago. It’s behind the years-late project to electrify the line between Manchester, Bolton and Preston. It’s centralised but leaves local teams to cope with the problems it brings.
Driving devolution will sit high on Andrew Haines’ agenda when he becomes chief executive later this summer. Grayling told MPs: “The devolution of Network Rail from a centralised organisation to an organisation of devolved route-based businesses is the essential next step to paving the way for them to create the kind of partnerships the railway needs for the future.”
Haines will need to drive improved performance because there’s a sting on the tail of public-private alliances, such as Scotland has. Under ScotRail Alliance sits ScotRail as train operator and Network Rail Scotland as infrastructure provider. When trains fail, ScotRail gets the blame. When signalling or other infrastructure fails, ScotRail Alliance gets the blame. In other words, the train operator’s name features for failures of track and train while Network Rail isn’t mentioned. This perpetuates the feeling that NR’s idea of an alliance is that the train operators take the flak.
If Grayling takes forward LNER as the name of his proposed partnership between East Coast’s inter-city train operator and the Network Rail routes, he will create a situation where NR can perform badly with no risk to its reputation. And that’s the only risk that has any relevance because there’s no point DfT fining its subsidiary for poor performance. Private partners will find that ‘heads NR wins, tails train operator loses’ set-up a tough sell to their boards and shareholders.
NR’s alliance with South West Trains failed when the two sides couldn’t agree about money. Civil servants rightly become twitchy at any hint of public money leaking into private pockets. Nor is it reasonable to expect a train operator to subsidise the public side of an alliance beyond what is formally contracted.
Grayling admitted the difficulties of exposing the private sector to NR’s infrastructure risks: “The truth is that the train operators we have at the moment do not have balance sheets that are big enough and strong enough to start taking significant infrastructure risks. The state and/or Network Rail have to stand behind them. However we shape things for the future, it is difficult to see any private entity taking on to its own shoulders the risk of failure of a Victorian rail infrastructure. Whatever happens, the state is going to play a role.”
He continued: “It is not privatising the whole lot. I would not seek to privatise the infrastructure again. The state has a role and will continue to have a role. The state brings strengths and the private sector brings strengths. If you weld them together in a joined-up railway, you probably have the best way of running a railway in today’s world and dealing with its very real operational challenges.”
Alliances expose the difficulties of customers and suppliers trying to act as one. Welding them together, to use Grayling’s phrase, suggests that his civil servants will need to look at how train operators pay NR. Currently, NR receives most of its money from its grant from government and the fixed charges that train operators pay. Operators also pay comparatively small variable charges that depend on the type and number of trains they run.
This means that adding extra trains adds little extra to operators’ bills and the extra train that pushes track capacity to its limit provides little extra income to add to that capacity. Prescriptive franchise contracts mean that train operators can’t cut quiet trains. Britain’s busy network has costs and trains fixed with little room for anyone to manoeuvre.
If Chris Grayling is to look at new public-private partnerships, he should expand his examination to look at the wider problems of funding and using the railway. Privatisation changed everything in the 1990s. Two decades later, it is time to look again. Grayling has pledged to keep NR in the public sector. That at least fixes one piece of the railway jigsaw. But even a public NR might increasingly rely on the private sector for some of its core functions. Signalling, for example, could see its interlocking moved to a remote computer as a leased ‘cloud’ function. Infrastructure Projects could become an independent arm of NR, competing with private companies for work that devolved route managing directors specify. System Operator’s long-term strategic planning and short-term timetabling functions demand some independence from the rest of NR.
Whether Grayling and his department has the capacity for such a radical review remains to be seen while the government remains fixed by the problems of Brexit. That suggests his public-private partnership idea will become a sticking plaster rather than a considered look that could endure for another two decades.

This article first appeared in RAIL 859, published on August 15 2018.