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In the concluding part of our recent series on the London Overground, we talked about the future of TfL’s Concession system. We also touched briefly on the wider topic – the “elephant in the room” – the question of rail franchise devolution.

With a government that (superficially at least) is committed to local devolution of services, questions over the franchise system being raised, key franchises soon up for grabs and the Overground standing as a shining example of a competent blend of public and private sector thinking, the time for TfL to grab back some control over franchising would seem to be at hand.

“You didn’t expect us to, but we passed your little test,” TfL seem to be beginning to say to the DfT, “so what are we going to do about it?”

As we indicated in the article, there had been hints that this was a topic that TfL had begun pushing the DfT on, having had NERA prepare a report detailing how devolution might work within the London context.

Handily, it appears that this report – entitled “The Costs and Benefits of Devolving Responsibility for Rail Services in London” can, with a bit of digging, be found on NERA’s website.

The report’s recommendations and conclusions are simple. If responsibility for management of Franchises within London were devolved to TfL, the report claims, this would not only likely improve passenger experience but also yield approximately £290m in net savings over the next 20 years.

The bulk of that saving, as well as the reduced complexity of managing rail project work in London, would enable investment of £180m into infrastructure improvements on those lines, which themselves would then deliver a further £350m worth of passenger benefits.

It’s a bold conclusion, but it’s one that will likely come as no surprise to many both within the industry and without. For as the McNulty report also suggested, the idea of the “one size fits all” franchising system is no longer effective for UK Rail – if it ever was at all.

Even taking on board the fact that it’s a TfL-commissioned paper, the report presents a strong case for the devolution of franchising within London at least. Almost 14% of all London workers use National Rail services to make their journey to work and there are 9 non-Overground Franchises that serve London (of which 5 are entirely or primarily concerned with passenger traffic within the London area). National Rail thus plays a key role in the day-to-day lives of many of London’s citizens and commuters, yet with the exception of the ability to propose increments or decrements (for which they must pay) to a Franchise Specification whilst the DfT is drawing it up, TfL currently have no official control or influence over Franchises. They are scoped by the DfT, awarded by the DfT and managed by the DfT, who also have responsibility for highlighting and dealing with any problems caused by the Train Operating Companies (TOCs).

The graphic above, taken from the report, gives a good visual summary of the current situation.
It’s one that, unsurprisingly perhaps, the report suggests causes significant issues for TfL and London in general. Firstly, the Increments and Decrements TfL can propose at the specification stage must be Franchise-specific, making it difficult to bring about changes and improvements that cross Franchise jurisdictions or are multi-modal. This is made worse by the fact that all of the Franchises start and end at different times and the difficulty in changing Franchise conditions mid-contract makes long-term London-wide system changes almost impossible to implement.

Indeed as regular readers will know only too well, the battle to bring Oyster to National Rail was a long and contentious one, and a good demonstration of these difficulties in action. It was a change that was resisted by many TOCs, who forced through the creation of an Oyster Extension Permit (OEP) system that was terminally flawed, penalised Travelcard holders and was eventually quietly removed earlier this year. Indeed TOC commitment to Oyster is still often less than enthusiastic, with the ability to top up at National Rail stations still occasionally a lottery, and the TOCs current obsession with “dumbelling” a contributing factor to the ever-increasing maximum Oyster cap.

As the NERA report also points out, the current Franchise system is also a major barrier to any attempt to reform the fare structure, in London at the very least, as well as a barrier to wider synchronisation of things such as branding and service levels.

It is worth jumping ahead here partially to consider why the above might be the case – after all, the privatization of the railways and the creation of the Franchise system was, conceptually at least, meant to bring about a better situation for all. The introduction of a healthy dose of competition in the market place would, the theory went, increase pressure on TOCs to price competitively. The threat of dissatisfied customers abandoning rail services if they were irregular or too expensive would then ensure a better passenger experience – less passengers would mean less money in the farebox and that would be bad for the Operator’s profits. Similarly, the Operator would be naturally encouraged to bring in service improvements, as they would bring more passengers.

As the NERA report acknowledges, however, the truth is that the above state of affairs (known as “Revenue Risk”) doesn’t actually hold true in London. London’s suburban lines are primarily utilized by commuters – a group that is relatively immune to major shifts in rail usage (at least within the timescale of the average Franchise). On top of this, many suburban services are now also often oversubscribed. Any “extra” capacity thus caused by significant service dissatisfaction is simply filled by the excess demand in place. In a nutshell, one of the primary crutches on which the Franchise system depends in reality doesn’t exist for most TOCs within London, yet in financial terms the TOCs still have to factor it in to the equation (in a “the value of your investment may go down as well as up” sense) increasing the price they charge for running the railways.

Given all the above, it is hardly surprising that the report suggests dramatically increasing TfL’s role in the Franchising process. What might come as a surprise to some, however, is just how far out the report recommends that influence be extended. As the diagram below shows, not only do the expected candidates of Chingford and Enfield feature – but so do commuter hubs such as Guildford and Stevenage.

The report suggests three main forms which this increased influence might take.

Firstly, it suggests that joint DfT/TfL contracts might be signed with Franchisees. These contracts would effectively split the services they covered into “inner” and “outer” services. The inner would cover London services and would fall under the responsibility of TfL. They would set the service levels, expectations and commitments and – most importantly – agree a set fee to be paid for delivery. This would remove revenue risk, reducing the cost of delivering the service which would be paid for by TfL from a London Rail budget transferred to it by the DfT. The outer services would either continue to be run as the DfT saw fit and be overseen by them.

The diagram below gives an idea how this might work structurally.

It’s a model that the report acknowledges has some problems that would need to be overcome. TfL and the DfT would have to agree boundaries and a framework for splitting revenue. They would also have to jointly create measures to prevent gamesmanship by the TOCs (retiming fast services, for example, or other timetable tweaks aimed at exploiting the penalties and rewards within the contract). Finally, an effective legal framework would have to be created that would support the joint stewardship of the Franchise by the DfT and TfL. The report concludes, however, that this first option represents the bare minimum that is needed to allow London’s rail to be reformed, and would at least mean no changes to the current Franchise boundaries were necessary.

The second model the NERA report suggests is more radical – a shakeup of the geography of the Franchise system to create specific London Franchises which would then be run by TfL as fully fledged Concessions – similar to the London Overground. This would be a more complex situation to bring about, and would require many Franchises to be redrawn and some of the resulting Franchise fragments may need to be combined to become viable operations. It might also prove slightly costlier to implement, but that would likely be counteracted in benefit terms by the reduction in the risk of gamesmanship and the simplification for the management structure (brought about by the removal of the DfT from the equation).

Finally, and interestingly, the report also suggests an option that would take this Concessioning approach one step further – give TfL the power to put in place the Concessions and give them the responsibility to act as Project Sponsors for any infrastructure projects carried out within the London boundary by Network Rail.

In some ways this is arguably the boldest suggestion within the report. It’s one however, that does make a certain amount of sense. As the report gently points out, TfL perhaps have a greater stake in seeing Network Rail carry out work efficiently and effectively on the network in London than the DfT, and that through taking responsibility for project sponsorship on the North London Line TfL have demonstrated that they can deliver efficiencies and savings effectively . Not so subtly (although it is at least buried in the footnotes), it also suggests that TfL feel that Network Rail could do with a bit more rigorous project oversight, as a close look at various London rail infrastructure projects had shown that Network Rail had been double-billing as project costs various elements of work that technically the DfT had already paid them to do as part of their maintenance and renewals budget.

All of the above options, the report concludes, would enable TfL to make the major improvements in both the quality and cost of London’s rail network indicated at the top of the article. It’s an impressive saving figure – £290m – that is quoted (although its worth remembering that this is factored over 20 years), and the report suggests that the vast majority of this saving will be gained through the absorption of revenue risk.

Beyond the cost saving though and of equal importance, is the perceived opportunity for major changes that the report suggests this would open up – the opportunity to reform the fare structure, improve services and make them more consistent, and invest further in London’s rail network.

It’s an interesting vision, and the report is well worth a read for those wondering just how any devolution or reform of the Franchise System might play out.

You can read the report in full here.

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There are 27 comments on this article
  1. KitGreen says:

    Surely double-billing is fraud. Have there been any prosecutions or sackings?
    Is the map you show the first time that the Sutton Loop has been shown as the (expected) Blackfriars terminators?

    I like the pop-out picture/graphics that you have implemented on this site, despite being very Facebook!

  2. John Bull says:

    Surely double-billing is fraud. Have there been any prosecutions or sackings?

    I’m assuming that it was caught and declared a mistake (or accounting error) and rectified via the normal process of dispute between DfT and Network Rail once TfL had pointed it out.

    I did laugh out loud when I saw it in the footnotes though, I’ll admit.

    Re: Sutton Loop – Not sure whether its the first time its been shown that way, but it certainly must have been one of the earliest.

  3. Henry says:

    I assume the suggestion from the map that Crossrail goes to Woolwich Arsenal rather than a separate station is another error…

  4. timbeau says:

    The Sutton Loop is shown as only going to Blackfriars via Wimbledon – via Mitcham it goes to London Bridge. Does this imply the future service from Tulse Hill to Blackfrairs is only to be 2tph, or that the service from Tulse Hill to Wimbledon via Tooting will increase to 4tph?

    If all the money spent on reports, RUS, etc since privatisiation had been spent on infrastructure, I wonder what we could have achieved?

  5. mr_jrt says:

    I’m surprised at a number of things in that graphic. #1 that Crossrail ends at Maidenhead, #2 that TfL don’t want oversight on the Tring locals on the WCML (nor the St. Albans branch)…but do want control over the Guildford services!

    …and finally, #3 it’s somewhat counter-intuitive that they don’t have the Amersham services shown, and I’d expect them to want control out to at least High Wycombe…if not Aylesbury from both lines if they’re interesting in Stevenage and Guildford.

    …oh, and #4, Grays would be another logical boundary too.

  6. Richardr says:

    The biggest issue is that TfL is ultimately controlled by the London residents, whereas many of the lines are largely used by non-Londoners – albeit to come into London. Take the Thameslink route for example. It would be in Londoners interests for all services to stop at all London stations from Mill Hill onwards. On the other hand, that isn’t in the interests of the majority of (current) customers who come from further afield. Why would TfL take the latters’ interests into account?

  7. timbeau says:

    The services chosen seem to be those which provide a stopping service within London, even if they extend a bit outside. Thus C2C and Chiltern are not included because TfL already controls the stopping services on those routes (District and Met). Guildford via Cobham is part of SWT’s suburban services but Guildford via Woking is part of the Portsmouth line route, so the separateion there makes some kind of sense – similarly the split between the Windsor and Reading services.

    A handful of London stations would remain outside TfL’s remit – Sanderstead, Dagenham Dock, Marylebone, Stratford International.

    Two odd anomalies is that the ealing-Greenford and Romford-Upminster shuttles would remain outside TfL control – presumably they are seen as part of the GWML and GEML networks rather than Crossrail, although most services calling at Ealing Broadway and Romford will be Crossrail sevices.

  8. Michael says:

    mr_jrt, while the Grays via Ockendon local services would make sense on a map, operationally it would be incredibly inefficient having to provide separate facilities and staff to run it separately from the rest of the Fenchurch Street services.

    The Tring services only call at two stops within Greater London, while it and the High Wycombe services again would be incredibly inefficient to run separate from the other services on their respective lines.

    The south London, FCC (GN and Thameslink), and Liverpool Street services listed all could simply be done by taking over the specific depots and staff and that operate them.

    richardr, if you look at the map it only includes the Luton services that call at all London stations as suitable for takeover by TfL. The fast trains to Bedford, which you allude to, and not included, so the problem you mention does not arise.

    That said, the Metropolitan line does run fast avoiding London stations for the benefit of of those on it outer reaches, so even if they did run such a service it would not be without precedent.

  9. Fandroid says:

    It’s wonderful that a lot of brainpower has been exercised on how to avoid abuse of franchises, but the fundamental question of why we have them in the first place cannot be asked. A Tfl London Rail franchise (or concession) would reverse much of that massive effort that the Strategic Rail Authority (remember them?) put into trying to ensure that either only one (or the minimum number) of franchises operated into each London Terminus. The modern British obsession with ‘sweating the assets’ (in rail terms – stuffing as many services down one line as possible) has left multiple services of quite different character sharing lines and platforms. Most of the RUS’s have been nothing but a maximisation of this ‘sweating’ process. The advent of shared control rooms (Network Rail-TOC) were necessary to ensure that chaos doesn’t reign permanently. Are they going to invite TfL in to them too?

  10. Anonymous says:

    How about the Uckfied and E Grinstead branches?

  11. Anonymous says:

    The trouble is that there would be many towns (e.g. Stevenage as mentioned) that would have their services with no democratic representation (see Richardr’s comment yesterday at 6.48). This is fundamentally wrong just to suit the Empire building aspirations of TfL.

  12. Chris says:

    Regarding ‘democratic representation’ – how are the current franchises in any way democratic?
    I can’t see that TfL will do a worse job for Guildford or Stevenage than SWT or FCC. I say bring it on! It will do much to simplify travel in south London.

  13. Anonymous says:

    Commuter towns such as Stevenage would still have services not managed by Tfl though. In all honestly, I think the vast majority of commuters care less about democratic control over their rail route into London than that said route works, is clean and not expensive.

    That being said it does highlight a point. RATP, the transport body for Paris and its metro area, is answerable to STIF which I believe itself is answerable not only to the Mayor, but to all leaders of Departments in the whole of Ile-de-France*. This makes revenue raising mechanisms such as the transport tax easier to sell across the region due to all departments having a say in how RATP operates to a degree (that it is weighted so suburbs pay less than Paris helps).

    If Tfl branch out into the HCs, should a seat be given to those counties’ council leaders, at least in relation to rail? London and the towns and suburbs in its commuter belt depend upon each other anyway for prosperity.

    *This also highlights that when the County of London expanded into the areas covered by the term ‘Greater London’, a new Greater London should have been established taking in the bulk of the HCs (bar any Western, Eastern, etc extremes such as parts of Kent, Berkshire and Essex) and that should have been the region, rather than the nonsense of the SE being split into 3 official regions of England. This would have made regional cooperation and coordination easier.

  14. Michael says:

    Anonymous 2:54pm, in what way will they lack democratic representation? TfL already successfully operate services that go beyond the Greater London Boundary on the Metropolitan and Central lines, and London Overground. In those locations they work with the relevant local councils.

    For example, Essex County Council negotiated a subsidy with TfL so that their stations in Essex are included within zone 6 and benefit from cheaper fares. And Hertfordshire County Council have been negotiating with the DfT for funding to reopen the Croxley link on the Metropolitan line, with support from TfL.

    The former would probably have been prohibitively expensive with a DfT awarded franchise, while the latter would be exactly the same. And if Hertfordshire County Council can push an extension of a wholly owned TfL railway with the DfT in the west of the county then I fail to see why they would not be able to stand up for services in the north should they come under TfL operation.

  15. Greg Tingey says:

    What is this “democratic representation” of which you speak?
    And for whose benefit was (rail) privatisation?

    Well, I can aswer the latter:
    It was for the benefit of a sub-group of the right-wing of the tory party and their crooked friends. I was reminded of this outside the NRM at York on Friday, where I saw a sign that I hoped had vanished:
    “Norris” of the now-thankfully defunct company run by the crooked tory slimebag Stephen Jarvis (or is that the other way around?)
    The unspeakable Marples was another such, employing his Beeching paid hatchet-man for his own profit.
    Incidentally, there maust be a labour equivalent to these: – perhaps Derek Hatton?

  16. Timbeau says:

    Rail privatisation was supposed to get private capital invested in improving the rail network. The idea being that the increased revenue from better/more popular services would provide a return on that investment. Now we are told that improvements have to be paid for by increases in fares (current customers paying for future improvements – a business model that only works with a monopoly: in a competitive market old stock can only be offloaded at reduced prices).

    So private money is being invested in the railway, but it is coming from you and me – the farepayer – whilst the dividends go to the shareholdres of the operating companies and rolling stock leasing companies.

  17. Fandroid says:

    If TfL has any political nous it will ensure that the home counties will feel included in influencing train services managed by Tfl and extending into their areas. The great shame is that there is no longer any regional body that can influence the cross-boundary train services serving the densely populated areas beyond TfL’s desired limits. For example, Berkshire was split into six unitary authorities back in the mid 1990s just because the minister, John Redwood, didn’t want to upset his own constituency, Wokingham, by merging it with its bigger neighbours. That means that the middle & eastern part of the county, which has a fairly dense rail network, has no overall coordinating body. Also it has no-one with clout to talk sense with its bigger neighbours which share some of its lines, ie TfL, Surrey, Hants, Bucks & Oxfordshire.

    However much the English seem to hate the idea of regional government, it sure makes sense for democratic control of railways, as can be seen in our own northern big cities. Network SE desperately needs something similar. The current gov dislikes Quangos, but is not ministerial/civil service interference a lot worse?

    Full marks to TfL for continuing to push for greater control. At least they are an identifiable public body which can be challenged, unlike the multitudinous buck-passers & excuse-makers of Network Rail, DfT & the TOCs.

  18. swirlythingy says:

    Am I the only person who noticed that purple line leading off the Windsor & Eton Riverside branch squarely into the south side of Heathrow Airport? Subterfuge and intrigue, or just good old-fashioned out-of-date map data?

  19. Alex says:

    of which 5 are entirely or primarily concerned with passenger traffic within the London area

    I’d be in for moving all five at least into TfL/LOROL control, or what we might call “SouthEast Network”:-), as the closest thing available to renationalisation. In fact, even in a renationalisation scenario I could see arguments for bringing much of the ex-NSE system into TfL control for the sake of coherence, integration, and accountability. The RMT-advocated idea of simply issuing no new franchises and letting them expire could be altered so the London ones transfer to TfL when they revert. Come to think of it, franchises that have a PTE could be treated the same way. That eventually leaves you with regional/PTE, InterCity, and Freightliner units – hey presto, back to the functional organisation era.

    The “Joint Franchises” one looks like an utter dog’s breakfast of bureaucracy and dotted-line relationships, very much in the post-Railtrack style of lots of different bodies yelling at each other with DfT acting as ref. But in this case there would be two competing referees.

  20. Fandroid says:

    @swirlythingy – no you weren’t the only one to notice. Three possibilities for the Staines-Heathrow line being on the map.

    Note the publishing date of the report – 31 March 2011
    BAA only announced the abandonment of Airtrack at about the same time (JB reported it on LR on 12 April)

    Either (1) the NERA authors realised and said ‘dash it, we need to get this report out now. Only a few trainspotters will actually read the map, and it will give them hours of fun talking about it.’
    or (2) they didn’t spot the problem themselves. That’s quite likely, as I have noticed that in many an esteemed journal, no-one really checks to see if the graphics properly match the text.
    or (3) they didn’t have any advance warning from BAA

  21. Antje says:

    Meh, let the Overground take over all of the Inner London services. It would be like the Berlin S-Bahn.

  22. Timbeau says:

    Fandroid

    Most of the services have been selected to avoid such conflicts as far as practicable – which is why the line to Guildford via Cobham is included and the one via Woking isn’t. In most four track territory TfL will have the slow lines and the other operator the fast – as already happens for example on the WCML to Watford Junction, Upminster line, Metropolitan/Chiltern route.

  23. ricp says:

    The Mayor’s Network was set out by Da-fT some years ago. It went to most of the peripheral centres around the M25, most of which seemed to begin with the letters S or W. Start at Slough, Watford, (Not listed in the Da-fT report) St Albans, Welwyn Garden City, Ware (Hertford actually), Shenfield, Sevenoaks, Warlingham, Woking / Surbiton and back to Slough. That was an area several people considered in the 90s, and was endorsed by Da-fT. Mayor Ken was quite keen to develop this, but negotiations were slow with both the DfT and ATOC, as the civil servants seemed as opposed to this as ATOC. It has taken long enough to get Oyster agreed, let alone any other changes. Boris has been a bit tardy on this one, hence the Consultants.

  24. timbeau says:

    Sorry to resurrect a relatively old thread, but I was looking at the map again and wondered if anyone could enlighten me on a few more anomalies:

    SWT’s services to Dorking are shown as ripe for TfL control, but Southern’s are not, despite the fact that the entire Southern route is shared with TfL-planned services (except for the services that are extended to Horsham).

    There is a mysterious service shown from London Bridge to Guildford via Forest Hill, Carshalton and Leatherhead, corresponding to no existing service (although Thameslink did at one time run to Guildford via Mitcham Junction). Despite, again, sharing tracks throughout with TfL services, this is also shown as outside TfL control.

    South Eastern services to Dartford are shown as TfL controlled, but those running beyond there to Gravesend and the Medway Towns are not. However, the Lewisham-Woolwich connection via the Charlton Tunnel, which is only used by the Gillingham service, is shown as a TfL route.

  25. Anonymous says:

    “SWT’s services to Dorking are shown as ripe for TfL control, but Southern’s are not”

    Southern’s services to Dorking/Horsham are limited stop ones in London, running fast from Clapham Junction to Sutton, then only calling at Cheam within Greater London. South West Train’s Dorking services are local ones that call at all stations save Queenstown Road within Greater London.

    “There is a mysterious service shown from London Bridge to Guildford via Forest Hill, Carshalton and Leatherhead, corresponding to no existing service ”

    There is one commuter service per day over this route. It departs Guildford at 7:25am and returns from London Bridge at 5:29pm.

    “the Lewisham-Woolwich connection via the Charlton Tunnel, which is only used by the Gillingham service, is shown as a TfL route.”

    Maybe they are thinking of changing the service pattern, it is a post-Crossrail map. As it also omits the loop services on those lines, which operate wholly within Greater London, I would not take it too literally anyway.

  26. Nick says:

    “Southern’s services to Dorking/Horsham are limited stop ones in London, running fast from Clapham Junction to Sutton, then only calling at Cheam within Greater London.”

    Not true. While there are a few trains on this route that run fast from Sutton to Clapham Junction, the majority stop at Carshalton, Hackbridge, Mitcham Junction, Mitcham Eastfields and Balham. They’re only fast through Wandsworth Common and Battersea Park.

  27. Anonymous says:

    The stopping trains on the Sutton route only go as far as Epsom, which should be in Zone 6 based on Epsom Downs and Tattenham Corner, the Dorking, Horsham service is limited stop.

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