Higher fares and service cuts floated for North’s rail franchise

RAIL

Northern: some fares ‘too cheap’

Northern: some fares ‘too cheap’

Rail passengers in the North of England could face higher fares, frequency reductions on some lightly-used lines and stations, and lower staffing levels when the new franchise commences in February 2016.

The DfT and the Rail North partnership of 30 local authorities have just launched a public consultation on the new Northern and TransPennine Express franchises and the DfT has separately launched the pre-qualification process for franchise bids.

“While there have been some important developments, there is much about the Northern franchise which has been unchanged for 20 years or more,” says the DfT in its prospectus for franchise bidders. It wants a “transformation” in services and says bidders should provide extra capacity to meet demand.

But it adds: “It will be essential that the new franchise does more with less. [DfT] Rail Executive sees improved efficiency as a key element in transforming the franchise.”

The Northern franchise is likely to be awarded for eight to ten years but TPE is likely to run for seven to nine. They will be let by the DfT and managed by a partnership of the DfT and Rail North.

In both franchises the operator will have to take the full revenue risk. “This will include all exogenous and endogenous risk,” the DfT emphasises.

The Northern franchise carried 89.8 million passengers in 2012/13, compared with 24.9 million on TPE.

Passenger journeys on the Northern franchise grew by an average of 3.6% per annum between 2004/05 and 2012/13, and passenger revenue grew at an average of 3.5% (real, i.e. with inflation factored in). 

Rail North expects passenger demand across the North of England to continue growing, by 2.5% per annum. A major programme of investment is underway, including the Northern Hub project centred on Manchester. A number of routes are also being electrified: Manchester-Liverpool via Newton-le-Willows (December 2014); Liverpool-Wigan (December 2014); Manchester-Bolton-Preston (December 2016); Manchester-Stalybridge (December 2016), Preston-Blackpool North (March 2017); and the main trans-Pennine corridor (Manchester-Huddersfield-Leeds-York/Selby) by the end of 2018.  

The Northern franchise remains heavily dependent on subsidy. Net franchise support was £1.44 for every £1 of passenger revenue in 2012/13. Passenger revenues generated £216m in 2012, accounting for 36% of the £592m annual turnover. Subsidy accounted for £324m (55%). 

On TPE the annual subsidy is £41m.

“Certain trade-offs may be required,” say the DfT/Rail North, discussing the Northern franchise. Illustrating the point, they state: “As demand patterns change there may be a stronger case for improving some weekend, early and late services but the additional revenue from this many not cover the additional costs. 

“At the same time there are many very lightly-used services and stations, especially among those operated by Northern. This all points to the need to redistribute the available resources to match current and future needs, while protecting those services that are genuinely essential.”

“We are not considering line or station closures within this review of the franchise design,” says the consultation document. It does, however, ask for views on reducing service frequencies where demand is low, and cutting the number of stops at stations where demand is low, to accelerate journey times for other passengers. 

Of Northern’s £559m costs in 2012, staffing accounted for £203m. A further £100m was Network Rail access costs; £59m was leasing of rolling stock and property; £6m was depreciation and amortisation; and £191m was ‘other’ (such as rolling stock maintenance, station and administration). 

The consultation says there are “three particular areas where trade-offs could be made”: rolling stock, fares and staffing.  

On rolling stock, it says: “We firmly believe the rolling stock on Northern services needs to be improved… but the more expensive the trains (and brand-new trains are likely to be the most expensive option of all), the harder it will be to justify current service levels where demand is low…” 

The consultation asks: “What are your views on giving priority to improving the quality of the Northern rolling stock at the expense of some reduction in lightly-used services (e.g. fewer calls at low-use stations)?”

The DfT points out that most of the Northern fleet is non-compliant with the European Technical Specification for Interoperability for Persons with Reduced Mobility. Unless granted a derogation, all vehicles have to be compliant by January 2020. 

“Proposals on how these requirements should be met will form an essential element of bids,” it says.

Pacer train farewell?

On the future of Northern’s unpopular ‘Pacer’ trains, built between 1985 and 1987, the DfT states: “From a design perspective they are difficult to make compliant [with the European specifications] but we understand that the rolling stock industry has developed practical plans for suitable modifications, which achieve this. These vehicles are the least costly to lease but are unpopular with many passengers. We are likely to require bidders to include plans, either in their core proposition or as an option, which would enable the withdrawal of all Pacer units from Northern services.”

The Rail North group of local authorities is exploring ways to reduce the cost of new trains for the Northern franchise. The group has commissioned consultants to study alternative options for financing and procuring rolling stock to the traditional model whereby train operators lease vehicles from Rolling Stock companies. One possibility is for Rail North to finance the new stock from borrowing. 

In a report to the West Yorkshire Combined Authority, director of development David Hoggarth said: “Early indications are that the access to cheaper finance could considerably narrow the gap between the cost of older rolling stock under the traditional model and the cost of new or significantly refurbished stock.”

Fare rises could feature in the Northern franchise. “We are currently working with Rail North on options to address fares anomalies and potential relaxation in fares regulation to help fund enhancements,” says the DfT. It says fares are “significantly below the norm” in the Manchester and Leeds areas. 

All Northern trains currently have both a driver and guard.  The DfT/Northern Rail state: “We expect to require bidders to set out how driver only operation [on Northern trains] can be introduced onto suitable services.”

The DfT also wants more use of technology in ticket retailing and the number of staff at stations cut. 

 A separate business unit for local services in the North East could be established within the Northern franchise. 

The DfT is considering transferring some services between franchises:

• TPE to Northern (Manchester Airport to Blackpool North; Oxenholme to Windermere; Lancaster to Barrow; York to Scarborough; and Doncaster to Cleethorpes). 

• Northern to East Midlands Trains: the Cleethorpes to Barton-on-Humber branch

• East Midlands Trains to TPE: Nottingham-Liverpool  

The Northern franchise is currently operated by a joint venture of Serco Group and Abellio. The TransPennine franchise is operated by First and Keolis.  

The closing date for the consultation is 18 August.