On Wednesday (29 January) the Secretary of State for Transport Grant Shapps, announced that the Northern Rail franchise would be removed from the private sector operator, Arriva Rail North (owned by Deutsche Bahn), and brought under Government control.

From 1 March 2020 services will be operated by Northern Trains Limited, a subsidiary of the Department for Transport’s OLR Holdings Limited (DOHL) – a publicly-owned company.

This ‘nationalisation’ of Arriva Rail North (ARN) has been a long time coming – services have suffered from a lack of promised infrastructure improvements, delayed rolling stock and the fallout from the May 2018 timetable changes. There have also been two years of ongoing industrial action.

The move comes at a time when the rail franchising system is under considerable strain and is likely to end once the Government publishes the long-promised rail reform White Paper, the outcome of the Williams Rail Review. Here we examine what went wrong and the possible effect on rail franchising.

What did Northern set out to do?

In 2015 the Government awarded the new Northern franchise to ARN, to run from April 2016 to March 2025. ARN promised to:

  • Remove old Pacer trains by the end of 2019
  • Invest £400 million in 281 new air-conditioned carriages
  • Provide more than 2,000 extra services a week
  • Increase capacity by almost 40% and create space for 31,000 extra passengers travelling into Liverpool, Manchester, Leeds, Sheffield and Newcastle during the morning rush-hour
  • Create a new high-quality ‘Northern Connect’ service, with new or refurbished trains on longer-distance services, faster journeys and stations staffed daily with catering services and free Wi-Fi at each one
  • Improve ticketing, including mobile and print-at-home tickets, and discounted fares for jobseekers.

Importantly, the Government expected that the amount of annual subsidy it would pay for the Northern franchise would be reduced by £160 million by the end of the contract.

What went wrong?

A series of events then proceeded to undermine the long-term sustainability of the franchise.

Notably, on 20 May 2018 the rail industry introduced a new timetable across swathes of the network. There followed months of disruption and ARN never really recovered. The rail regulator (ORR) and the Transport Select Committee observed that although Network Rail (the publicly owned infrastructure manager) was at fault for many of the failings and ongoing disruption, ARN bore some responsibility. The Committee reported ORR’s views as follows:

Northern had “engaged properly with Network Rail’s timetabling process, and the factors that caused the timetable to be replanned at a late stage were outside of its control.” In the circumstances, Northern could not, for example, have “reasonably accelerated the train crew diagramming process”.

However, the ORR found that Northern did not demonstrate that it “understood the full ramifications of the events leading up to the timetable change”. Despite the escalating difficulties, particularly in relation to driver training, as late as 9 May it expected “to be in a position to run a full service from the implementation of the new timetable on 20 May”.

[…] Ultimately this meant that Northern Rail passengers who faced severe disruption to services were not provided with information or advice “that would have allowed them to manage the impact”.

Furthermore, Network Rail failed to deliver promised infrastructure upgrades, with knock on effects for procuring new trains, which were critical for the capacity increases promised in 2015. There were also two years of industrial action due to Northern’s policy on removing guards from trains. All this created a perfect storm of poor services, anguished and inconvenienced passengers and had a severe impact on ARN’s bottom line.

Why didn’t the Government nationalise the franchise earlier?

The watchdog, Transport Focus, found in its latest National Rail Passenger Survey that ARN was the worst performing train operator, with just 72% of their passengers satisfied with their journey. However, the Secretary of State’s eventual decision to remove the franchise was because it was no longer financially sustainable.

Since the privatisation of the railways was completed some 22 years ago, only three franchises have ever been removed by the Secretary of State:  Connex South Eastern in 2003, National Express East Coast in 2009 and Virgin East Coast in 2018 – all because of financial default.

It is incredibly difficult to remove franchises for poor performance, but often (though not always) poor performance can have knock-on financial consequences that contribute to an ultimate financial default.

Is this the end of franchising?

There has been speculation that both TransPennine Express and South Western Railway could face further action from the Secretary of State.  Whether this would go as far as removing their franchises is not clear at this stage and would depend on the individual circumstances.   Beyond that, the long-promised rail reform White Paper is expected sometime in early 2020. It has been widely trailed as leading to the end of franchising. In his 29 January statement, the Secretary of State concluded: “It is clear that the current model is now struggling to deliver…we know change is needed, and it is coming.”

About the authors: Louise Butcher is a researcher at the House of Commons Library, specialising in transport.

Photo: North West Transport Photos: (CC BY-SA 2.0).