UK: 'Railways: at the end of the line'

[John Ashworth]

Railways: at the end of the line

The problem is that the privatised rail franchising system was conceived in buoyant economic times that no longer exist

Editorial
The Guardian, Thursday 6 December 2012 20.58 GMT

When the outwardly unflappable transport secretary Patrick McLoughlin addresses MPs you can easily form the impression that his is a well-run department with settled policy goals and sharply defined lines of authority. In fact, Mr McLoughlin presides over a department in turmoil. In his three months there, the seventh occupant of the secretary of state's office in the past six years has dealt rather deftly with the west coast mainline franchise fiasco. But the franchising system and the DfT's management of it remain a shambles.

On Thursday, Mr McLoughlin told MPs that the inquiry by Centrica chairman Sam Laidlaw into the collapse of this summer's franchising process for the west coast line had exposed extremely serious flaws that have cost the taxpayer at least £40m. The core error was the failure to correctly calculate the risk capital that bidders would have to guarantee to ensure that they did not walk away from the franchise if they could not make it pay. This was compounded by slipshod negotiations with the bidders. As a result, more cock-up than conspiracy according to Mr Laidlaw, Virgin Trains was wrongly removed from the franchise to which it has now been temporarily restored until late 2014.

There is no disputing, on the basis of Laidlaw, that the department has blundered. There is much dispute, however, about who bears the main responsibility. Three suspended senior officials may be eligible to return to their jobs for now. But the blame game goes on within the DfT, with politicians pointing the finger at officials and officials gagged from hitting back. Meanwhile, the ministers on whose watch these disasters actually took place, Justine Greening and Theresa Villiers, have moved seamlessly on to other cabinet posts.

But there is more to this than individual or institutional failure. The underlying problem is that the privatised rail franchising system was conceived in buoyant economic times that no longer exist. Once the economy began to contract, the rewards for franchisees and the reliability of revenue modelling became more uncertain. This was difficult enough, but it was compounded by the reckless decision by Philip Hammond in 2011 to increase franchises to last well past a decade. The west coast franchise was the first to be put out to tender under the Hammond system, as well as one of the largest. Predictably, the process proved to be unsustainable.

Mr McLoughlin will soon publish Richard Brown's report on the wider lessons for franchising. Long-term economic uncertainty is no friend to the current franchising system. Renationalisation is a costly option, especially when public money is so tight. Yet big changes are needed all the same. To coin a phrase, the current system is no way to run a railway.