Reform of the rail franchising programme inquiry

The last time we discussed rail franchising was in 2012, in the wake of the collapsed competition for the InterCity West Coast franchise. We are encouraged that, since then, the Department for Transport (the Department) has strengthened its capability to let franchises, but there are still gaps in its ability to then manage the contracts effectively.

The Department’s increased focus on the passenger experience is also welcome, but it is unclear when passengers themselves will actually see the benefits. Furthermore, the Department has not yet developed the partnerships with operators that are required to support innovation, improve efficiency and improve services for passengers.

Successful rail franchising depends on strong interest from the market and effective competition but there are barriers to entry to the UK market and the possibility that current participants in the market may drop out. Any reduction to the current level of competition is a major risk to securing value for money for the taxpayer.

Perhaps the biggest challenge facing the Department is to manage the complex interdependencies between passenger rail franchises, the infrastructure that train services run on and the introduction of new fleets of trains to the network. Uncertainty about infrastructure work has resulted in delays to franchise competitions and the Department will have to rely on potentially expensive changes to franchises during the life of contracts. The Department’s role is to provide a strategic lead for the complex rail system but it has not yet shown that it has embraced this role. It needs to provide a coherent strategic vision and stronger leadership to ensure that the investment decisions it makes now do not result in increased costs in the long term.