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Britain’s railways are braced for their biggest shake-up in a generation, with train franchises scrapped and the creation of a new supervisory body called Great British Railways to oversee the system.
A white paper, to be published on Thursday, will bring an end to the controversial franchise model under which train operating companies take most of the revenue risk from rising or falling passenger numbers.
It will be replaced by a “concession” system whereby the risk and reward for train companies is more limited, with a fee paid as long as punctuality and cleanliness targets are achieved.
The new system is based on that used by the London Overground, where the operator Arriva is paid to run trains but does not take on the risk of rising and falling revenue.
Train operators have largely welcomed the shift away from franchising, as the new contracts will provide stable revenue and less risk for those badly hit during the coronavirus pandemic. But they have pushed to keep more control over the timetabling, pricing and customer service than on the London Overground.
The new agreements, dubbed “national rail contracts”, are thought likely to last four to six years, a shorter period than the old franchises which varied in length but could run for close to 20 years.
A new ticket system for part-time commuters will be introduced but this will stop short of the flexible season tickets demanded by passenger groups.
The new supervisory body dubbed Great British Railways will incorporate Network Rail, and is expected to be run by NR’s current chair Sir Peter Hendy. It will provide strategic direction for both infrastructure and how the railway operates. Train companies are also expecting it to play a role in awarding new management contracts.
The changes come exactly three years after the botched implementation of a new timetable led the government to commission former British Airways boss Keith Williams to prepare a sweeping overhaul of Britain’s railways. It also follows acute uncertainty for the industry after the British public was ordered to work from home where possible at the start of the Covid-19 pandemic.
In March 2020, ministers effectively nationalised the railways, bringing in emergency contracts which meant all operators’ losses were subsidised by taxpayers to the tune of about £800m a month.
Ministers are set to describe the shake-up of the system as the biggest overhaul of the railways since the privatisation of British Rail in the 1990s.
Since then, passenger numbers have roughly doubled but the operation of the railways has endured a more difficult journey.
Railtrack, a private company that owned the network’s infrastructure, collapsed in 2001 and was replaced by Network Rail, while the centralised Strategic Rail Authority was abolished in 2006.
The franchise system has also frayed in recent years, as some operators failed to hit revenue targets and infrastructure upgrades were delayed. The franchise on the East Coast main line collapsed no fewer than three times in 12 years.
Passenger groups have complained that they were expecting part-time season tickets — enabling people working from home more often to save money. They had hoped for monthly travel cards for passengers only travelling two or three days a week at the equivalent per-day cost.
Instead, transport secretary Grant Shapps is set to offer “carnets” — packets of tickets — with eight return journeys per month and the option to buy more.
The transport department will publish various case studies on Thursday showing the impact of the new carnet system on different types of commute.
Meanwhile, the Treasury is insisting that the Department for Transport bears down on costs in the railway. Treasury officials are also keen for the private sector to start taking more of a share of the risk on rail contracts.
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