Government must act now to reform rail franchises

The Government’s commitment to reforming rail franchises has “barely begun to be turned into reality”, the Chairman of the Association of Train Operating Companies (ATOC) has said.

Speaking at a lecture at the Institution of Civil Engineers in central London, Tom Smith urged the Government to provide tangible evidence that it will deliver on this commitment by implementing less prescriptive franchises. He warned that unless the Government steps back from the day to day running of the railways, train companies’ efforts to attract more passengers and reduce industry costs will be hindered.

The ATOC chairman stressed that there is a narrow window of opportunity to implement genuine reform. An unprecedented series of franchises are due be let in the next few years that account for almost 70% of the industry’s revenue. He said that for the next three rail franchises, the bidders for which were announced at the end of last month, the Government must shift from telling train companies what they must do in every last detail, to drawing out what they will do over and above a minimum set of requirements.

Tom Smith said: “We need a new spirit in the relationship between the Government and the companies enfranchised to run train services and a new form of contract. Without reform, we will continue with inflexible, overly prescribed franchises that do not unlock the full potential of the industry to achieve growth and efficiency.

“Over the two year period since the coalition government came to power we have heard a lot about their commitment to reforming franchises along these lines – to be longer, less prescriptive, more output based and giving incentives to train companies to be innovative to grow their businesses in ways that meet the needs of their customers.

“Sadly that commitment has barely begun to be turned into reality, and we need tangible evidence that it will be. I call on the government to live up to its promises and make franchise reform a reality. The moment is now – there is an unprecedented series of franchises to be let and the time is opportune to introduce meaningful change to the terms of this contract.”

The speech also touched on a number of other areas:

– The need for politicians, regulators and watchdogs to have greater confidence in the different industry players to take the industry in the right direction.

– The need for train companies to keep on improving the ‘customer experience’ for passengers by developing a ‘top to bottom service culture’. ATOC’s Chairman will recognise that there are significant improvements that need to be made on information, fares and ticketing. He will point to major industry-wide projects to overhaul passenger information and improve ticketing and retailing to give passengers greater confidence that they are getting the best fare to suit their needs.

– Network Rail’s welcome move to a devolved structure that will help to reduce costs and benefit passengers. Tom Smith will also highlight the need for Network Rail and its supply chain to continue to improve engineering, technological and management processes as part of its drive to become more efficient.

– Operators’ support for the Government’s pledge to bring to an end the era of above inflation fare increases; and the industry’s plans to increase revenue from around £7bn today to £10bn by 2019 by attracting ever greater numbers of passengers to the railways.