Sixteen years after privatisation, Britain’s train companies are calling for reform of the system of franchising rail services to free them up to do more for passengers and taxpayers.

In a report published today, the Association of Train Operating Companies (ATOC) argues that smarter franchises need to go together with other policies to continue improving the attraction of rail compared with cars and air travel, all in the context of constrained public finances.

The report sets out six areas for reform which would strengthen the commercial signals for train operating companies (TOCs) to build on the industry’s success in generating record levels of investment, customer satisfaction and punctuality.  Less inappropriate micro-management by civil servants and greater use of longer franchises, among other reforms, would:

- Increase the focus on improving quality for passengers.  More focus by the Government on setting franchise outputs (such as improved passenger satisfaction levels, punctuality targets and peak time capacity) and less on the specific ways of achieving them (such as detailing the timetables to be run) would free TOCs to find the best ways of giving passengers what they want.  Longer franchises would also foster more TOC managerial focus on improving services for passengers, rather than looking ahead to the next bid.
- Speed up the delivery of improvements. Experience suggests that in the case of stations, for example, TOCs – with more streamlined decision-making - could deliver improvements faster than Network Rail.  TOCs’ record of working with rolling stock companies to lead £4.5bn worth of train orders in the years after privatisation to create one of the youngest vehicle fleets in Europe also suggests they should take on a bigger role from the DfT in procuring and refurbishing trains.
- Give taxpayers a better deal for their money.  Longer franchises would improve the prospects for attracting more private finance into rail, by giving operators more time to benefit from any investment they might make to improve service quality.  Giving TOCs more of a role in delivering station improvements, thanks to their lower overheads and approach in scoping projects, could save £250m or more from Network Rail’s prospective spend in this area.  Measures to improve risk sharing between TOCs and Government would also bring greater financial stability, to the benefit of both.
Michael Roberts, Chief Executive of ATOC, said: “At a time when the challenge facing all public services is how to deliver more for less, we have a window of opportunity in the railways to empower private train companies to do just that.

“By implementing a package of focused reforms in time for the next franchises which have to be let, the Government can increase the scope for train companies to bring innovation and commercial nous into improving the railways.

“Equally, we would keep the existing mechanisms to deal with any company that fails to perform: terminating a franchise under our proposals would be no more difficult for a longer franchise than for a shorter one. And our proposals for better risk sharing are precisely that – a continued sharing of risk between public and private sectors.

“What drives our proposals is a belief that giving train companies a greater stake in the railways – for example, in terms of longer franchises and wider areas of responsibility – is not only good for passengers and taxpayers, it is also fitting given their role as major public transport players with strong track records of delivery at home and abroad.

“This approach also frees other key players, such as Network Rail with their priorities of network management and enhancement, and Government as guardian of the public purse, to focus more on what they are best at.

“In this way, we believe franchising can evolve without the need for a more radical, destabilising overhaul which all the main political parties wish to avoid, and so better equip the industry to deliver a railway fit for the 21st century.”