When the 7.35am rebranded Northern Trains service departs from Darlington to Bishop Auckland on Sunday morning it will mark the first time since the privatisation of Britain’s railways in the mid-1990s that two operators will be under government control.
This weekend will see Arriva UK, a subsidiary of German state operated Deutsche Bahn, hand back the keys of the Northern rail franchise to Department for Transport, which runs a unit known as the “operator of last resort” or OLR.
The decision to nationalise the franchise was taken by Grant Shapps, the transport secretary, last month after more than a year of chaos at Northern, terminating the nine-year contract five years early.
The problems are symptomatic of a wider demise of the rail franchising system that was put in place at the time privatisation almost a quarter of century ago. At least four other franchises — South Western Railway, Transpennine Express, West Midlands and Greater Anglia — are facing problems caused by overbidding for the contracts and repeated government failures to deliver on infrastructure upgrades, delays in the delivery of new rolling stock and industrial action.
Mr Shapps indicated last month that South Western Railway, Britain’s second-biggest commuter network, could also come under public ownership after he said it was financially “not sustainable”. A decision is expected in the coming months.
The government must also make decisions on two other franchises — Southeastern and Great Western — with their current contracts expiring on April 1. Rail minister Chris Heaton-Harris signalled earlier this month that one of the options the government was considering for Southeastern was nationalisation.
The government’s in-house train operator has been running the East Coast mainline — rebranded as London and North Eastern Railway — since June 2018 following the collapse of Virgin East Coast. Mr Shapps looks set to extend that contract for a further three years while the government grapples with a long-promised shake-up of the franchise system.
This parlous state of another six of the 17 rail franchise operators raises questions over whether the OLR can cope given that experienced rail managers are at a premium. A DfT spokesperson said the government ensured it had the “necessary capacity and expertise available” to fulfil the role of OLR.
But one political adviser who deals with OLR said the organisation was already financially stretched. “They are pretty thinly staffed . . . I understand they are having great difficulty recruiting senior managers with appropriate experience and expertise,” he said.
But some in the industry doubt a Conservative government would tolerate further nationalisation as it would galvanise critics of private sector involvement in public services. The Labour party has long trumpeted public ownership of the railways, a policy that is popular among voters.
“There’s a limit to how many rail lines we would nationalise because it would start to raise big philosophical questions — and would also just send a signal that companies can walk away when it gets difficult,” said one government official.
When the OLR takes over operations of a franchise, it comes with a facelift: trains are repainted and rebranded and staff issued with new uniforms, but little else, including the timetable, changes.
Rail experts said the biggest difference comes from freeing the management team from strictures of financial commitments from a franchise agreement.
“The purpose of the OLR is to take away the pressures and restraints of franchise contracts which are so tight,” said Roger Ford, industry editor of Modern Railways. He noted that “state control” can actually bring about flexibility and innovation.
“You are freed from the need to tick off all the box ticking of what you’ve done. Staff can get on with innovation. You are run as a business instead of running it as a money making machine,” he added.
Anthony Smith, chief executive of Transport Focus, the passenger group, said that when the state is in control there can be a bit more innovation, pointing to the trial LNER is conducting with different types of fares.
With more operators teetering on the brink, the government is coming under pressure to accelerate plans to overhaul the fractured franchising system.
The government has long hinted at a sweeping reforms of the railways, with franchises replaced by more flexible longer contracts and the creation of an overarching body in charge of the network. The proposals will incorporate the final report of a near 18-month independent review into the rail industry by Keith Williams, the former British Airways chief executive.
But some are sceptical of the extent of the shake-up. As Mr Ford points out, there have been 31 government reviews into the railway industry since 2006 and the frequency has increased. “I’ve had no great expectations of the Williams’ review,” he said.
