All change for franchising?

With all the major political parties assessing the merits of various manifesto proposals ahead of next year’s General Election, Freshwater’s Jay Turner assesses Labour’s options for reforming the structure of UK passenger rail services.

A recent survey conducted by Opinium for the Observer on the future of rail showed that more than three times as many people back some form of renationalisation of rail services (55%) as oppose it (18%). It also showed that the suggestion of bringing franchises back under state control as they come to an end was backed by 60% of Conservative voters, and opposed by only 20%. Among Labour voters, the figures were 71% in favour and 8% against.

Then, last month, the Observer published a letter from more than 30 prospective parliamentary candidates calling for Ed Miliband to seriously consider some form of these ideas for Labour’s General Election manifesto. In the Observer letter, the candidates suggested that the not-for-profit East Coast model should be extended to the rest of the network.

And Labour’s policy chief Jon Cruddas met with representatives from affiliated rail unions TSSA, ASLEF and Unite as well as the RMT earlier in the year to discuss these very issues.

So, clearly Labour is keen on a revision of the passenger rail franchising system. But will Ed Miliband and his team opt for a truly radical alteration to the franchising system?

Since publication of the letter, Ed Miliband has admitted that Labour are considering the policy, which, if tied to a radical offer on rail fares, would represent a similar market intervention to Labour’s pledge to freeze energy bills. And back in April, in an interview with the Guardian, Miliband admitted that Labour is looking at different issues around franchising. He said: “There are different models you can use. You can have a competitive model where there is a public option like there is in East Coast at the moment. So we are looking at different models for this.”

Since taking over from Maria Eagle as Shadow Secretary of State for Transport, Mary Creagh, has made a number of public attacks on the current system. At a recent meeting of the All-Party Parliamentary Rail Group, she said that Labour is “looking at how our rail system could deliver more for passengers and taxpayers, who are paying for this out-of-touch government’s franchising fiasco through higher fares and more public subsidy.”

So what are the options being considered as part of Labour’s policy review?

A number of Labour campaigners favour taking franchises back into public ownership as they expire – and if Labour where to gain power, this would likely affect the Northern and TransPennine franchises first. Labour have been campaigning vociferously on the current East Coast arrangements and would like to see DfT delays in letting the franchise, allowing them – if they win the Election – to maintain public ownership of that franchise. Another related option would be to allow Directly Operated Railways to bid for control of other franchises against private sector bidders.

Moves towards bringing rail franchises back into the public sector will likely be heavily scrutinised by Shadow Chancellor Ed Balls, however, given the potential impact of the policy on the Government’s balance sheet. Mr Balls would also be wary of Labour being portrayed as anti-business or as rolling back to the pre-Thatcher era of nationalised industries.

And although many Labour MPs would support moves to full renationalisation, or some form of it, for many of them, opposition to renationalisation is down to the cost of doing so, as well as reservations on whether services would actually improve.

But if Labour could find a way for a move on franchises to fund a bold offer on fares, they will be expecting to pick up a high number of commuter votes in marginal seats across the country, particularly in the South East where they need them the most.

Whilst it is certain we will not see proposals for a return to a British Rail-style model (not least as the European Commission would have something to say about putting track and train back together), we can expect Labour to suggest either gradually bringing franchises back into state control, or, less radically, allowing Directly Operated Railways to bid for franchises in the same was as Deutsche Bahn / Arriva, Nederlandse Spoorwegen / Abellio, or SNCF / Keolis.

So what are the next steps for these plans? This summer all policy proposals will be discussed at Labour’s National Policy Forum and then Annual Conference, with the final versions being adopted into the manifesto. And for rail? I think the option on allowing DOR to bid is most likely. Though it won’t be enough for many Labour campaigners, I just can’t see the two Eds opting for a more radical offer.

Jay Turner is an Account Director at Freshwater Public Affairs in London.


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Impact Report 2017

Impact report 2017