Committees

Rail franchising inquiry launched

5 May 2016

The Transport Committee is conducting a series of inquiries into "the future of rail". The Committee launches the next in the series on rail franchising.

Background

Since privatisation in the mid-1990s, the very large majority of passenger rail services have operated via franchises, in which train operating companies compete to be awarded the right to run services within a specified area of the rail network, for a specified time period, in return for the right to charge fares; or if the franchise is not expected to be profit-making, receive public subsidies to maintain their services.

The central policy intentions of franchising include improving services through market competition and transferring a degree of the financial risk of running train services from the public to the private sector.

Serious concerns about the Department for Transport's (DfT) management of rail franchising emerged after the failure of InterCity West Coast franchise competition in 2012. The DfT re-launched its franchising programme in 2013 following the Laidlaw review (PDF 377 KB) and the Brown review (PDF 2.13 MB).

The Public Accounts Committee published a report on the re-launched rail franchising programme (PDF 218 KB) in February 2016. This followed up on a National Audit Office report (PDF 921 KB) published in December 2015.

In March 2016, the Competition and Markets Authority (CMA) published a policy document on increasing competition in rail services in Great Britain (PDF 2.82 MB). The CMA concluded that "an increase in […] competition could result in benefits for passengers and taxpayers."

Terms of reference

The Transport Committee's inquiry draws together and follows up on a number of key issues raised in recent reviews and considers the extent to which rail franchising is achieving its key policy intentions. The Committee intends to examine a current franchise competition, which will act as a case study.

The Committee is particularly interested in:

  • The extent to which the Department for Transport's approach to rail franchising is achieving its key policy intentions of transferring financial risk to the private sector and promoting competition in the market, while at the same time improving rail passenger experience
  • The extent to which the Department for Transport's approach to franchise bid evaluation strikes the right balance between cost, service quality and deliverability
  • The Department for Transport's franchise management capability and capacity and its ability to cope with high levels of planned franchising activity in 2016 and 2017
  • The costs of bidding for franchises and the extent to which increasing costs may be dissuading new entrants to the market
  • Actions which could be taken to encourage new entrants to the market
  • The opportunities, risks and feasibility of a significant increase in Open Access Operators on the rail network
  • Practical recommendations to better manage the effects of rail infrastructure works on rail franchisees, including through improved coordination with Network Rail and better management of major infrastructure projects

Once the outcome of the current East Anglia franchise competition is known:

  • Lessons learned from the competition for the East Anglia Franchise, including how the new arrangements are intended to improve services for passengers, and the mechanisms to hold the operator and Network Rail to account in the event of poor outcomes

The Committee would be grateful to receive written submissions by Friday 3 June 2016.

The "future of rail" series of inquiries

The Transport Committee launched the first inquiry in the "future of rail" series, into rail technology, in February 2016. Oral evidence on rail technology is likely to begin in May.

The Committee launched the second of its inquiries into improving the rail passenger experience in April 2016. Forthcoming "future of rail" inquires will consider rail safety, governance and financing.

The Committee is keen to receive submissions addressing the terms of reference of each of its rail inquiries from the range of rail industry stakeholders, including individual members of the public. However, please note that its remit precludes it from taking up individual cases. If you wish to complain about a poor experience when travelling by train you should first contact the relevant train company. If you are dissatisfied with the train company's response, you should contact either Transport Focus or London Travel Watch, as appropriate.

Further information

Image: PA