Northern Railways: an achievable vision
A discussion paper by Paul Salveson
Summary
This paper, based on a chapter of Railpolitik – bringing railways back to communities, argues for a serious ‘not-for-profit’ bid for the 2016 Northern franchise. The reality is that bids will need to comply with the current 1993 Railways Act legislation, which prevents publicly-owned companies (based in the UK at any rate) bidding for franchises. The proposed ‘Northern Railways’ would be a social enterprise based on a worker/consumer co-operative structure. Within the overall approach, there would be scope for innovative approaches to more local networks which would form part of the ‘Northern Railways’ franchise but have a degree of flexibility in how services are delivered. To make the bid winnable, three things are needed: 1) political will on the part of the authorities making up ‘Rail North’ to encourage a not-for-profit bid; 2)a franchise specification which encourages outcomes that would best be delivered by not-for-profit bidders; 3) sufficient initial funding to put together a bid team and shadow ‘Northern Railways’ co-operative.
The next step should be serious discussions between key players including transport authority chairs and senior Labour politicians in shire and unitary authorities with supportive MPs, the rail unions, co-operative movement and sympathetic rail specialists.
The opportunity
Can the UK’s regional railways become outstanding examples of social enterprise and sustainable transport? [1] The opportunities are there, in Wales, Scotland and the English regions. In the North of England there is an increasing likelihood of devolution of powers over the Northern and TransPennine franchises to a consortium of Northern authorities.[2] The emphasis of this paper is on how a ‘social enterprise’ train company could provide a very different kind of service to The North, combing innovation, high quality service and public accountability. The opportunities are there now. The new Northern franchise will be let in 2016 and preparations are already well under way, both within the Department for Transport and in Rail North. An alliance of Labour-controlled authorities, trades unions, the co-operative movement, transport campaigners and MPs should be established to take this issue forward, with – fairly soon - formation of a well-funded social enterprise which can mount a serious bid for the franchise.
The Northern and TransPennine franchises
Northern Rail operates local and regional services throughout the North, as far south as Nottingham and Stoke-on-Trent and as far north as Carlisle and Northumberland (Chathill). It operates an ageing fleet of diesel trains and a mix of electric traction. TransPennine Express operates faster inter-regional services across the North, particularly on the core Manchester – York corridor, but also serves Glasgow and Edinburgh and the North-East. It is an entirely diesel fleet but over the next few years much of the network will be electrified. The North of England rail network is desperately in need of investment and suffers from the legacy of a franchise let by the Department for Transport based on assumptions of ‘nil growth’. In fact, since the franchise began in 2004, the operation has achieved passenger growth of around 40%.
In 2011/2 Northern made a profit of just under £40 million whilst TPE earned over £60 million for its First and Keolis[3] shareholders. TransPennine has earned dividends totalling £185 million for its owners, representing a profit of 159%. Both franchises will now come up for renewal in February 2016, following the re-structuring of the franchising timetable early in 2013. There is a possibility that the two franchises will be merged into a single contract, but this is not yet clear. Why not build on the positive achievements of the two operations, and the undoubted enthusiasm of their managers and front-line staff, and create a truly outstanding mutually-owned railway for the North?
The current Northern Rail franchise isunwieldy, based around two very large area directorates (East and West) which are too big to manage effectively[4]. It should either have strongly devolved management units covering the main centres or at least four or five separate but complementary businesses. It would be desirable to retain a distinct ‘Northern Railways’ brand identity and shared resources, e.g. depot facilities. This approach of smaller units collaborating with each other may bring benefits of scale providing and ensure strong representation from the community and local government. [5]However, the model outlined below assumes a single operator with highly devolved business units and some peripheral lines run/managed as local sustainable transport companies. A very similar approach could be applied to separate socially-owned businesses operating under a ‘Northern Railways’ umbrella.
A mutual Northern Railways
The Co-operative Party’s proposals for Network Rail, published in 2008[6], fit much better with a passenger train operator than with Network Rail, whose main job should be delivering a safe and efficient infrastructure. The passenger interface is primarily with the train operator, though it is obviously important that Network Rail understands passenger needs. The Co-operative Party’s proposals involved the creation of a company limited by guarantee with two main groups of members: individual passengers who ‘buy in’ to the company and stakeholders (trades unions, local authorities, businesses and community rail partnerships). Any passenger could register as a member of the mutual company when they buy a ticket (on-line or at a booking office) and be entitled to vote in elections for governing bodies. Equally, individual employees would automatically become members of the company.
The company – ‘Northern Railways’ - could be created either by outside agencies (including unions, co-operative movement and campaign groups) or –in the longer term - by the Rail North (RN) consortium itself. For the 2016 franchise the best (and probably the only legal approach under the 1993 Railways Act) would be for a company to be formed by external agencies so it is kept at arms’ length from Rail North and DfT and can bid as any other independent company. If it is successful in its bid, the relationship between ‘Northern Railways’ and Rail North will be that as provider/purchaser as in any other franchise.
Northern Rail in its current guise requires an annual subsidy of around £500m, whilst making a profit to its owners of around £40 million. Whilst there should be an objective on the part of RN to bring this down over a period of years, the reality is that it will continue to require a high level of support, however it is run. It would operate as an arms-length company providing a ‘base-line’ of services required by RN but having incentives to develop additional services to meet identified demand and take some risk on innovative ventures. It would be ‘not-for-dividend’ with profits recycled into the business instead of exported to shareholders. Risk should be shared between the mutual and RN, along similar lines to the current Merseyrail franchise with Merseytravel.
There are other alternatives which include inviting bids from existing social enterprises to be the operator on a concession basis such as some of the larger well-established community transport operators. The preferred option is the creation of a bespoke company which may involve existing social enterprises but have sufficient funding behind it to mount a serious bid and cover the cost of the bond required from chosen bidders.
The suggested structure would be based on devolved units which align with the emerging city-region ‘combined authorities’ (see below) coupled with a ‘premier’ service which would be based on the former TransPennine Express inter-regional network, assuming that is integrated into the new franchise.
Mission and Values of Northern Railways
A ‘people’s railway’ needs to have a clear, simple and visionary mission and values which can inspire both its workers and customers. The following mission and values are based on those of Euskotren, the highly successful regionally-owned train and bus operator in the Basque Country.
MISSION: To meet themobility needsof communities and businesses within the North of England, providing a high quality, accessible and affordable service which respects theenvironment and promotes sustainable development.
VISION: To be aleading enterprise in The North distinguished byprovidingexcellentservice to customers, value for money to the taxpayer, high levels of employee and community engagement and a rewarding career forits workforce.
The values of the company should include socialresponsibility; responsiveness to customer needs; a culture of innovation which learns from best practice world-wide and a commitment to teamwork and partnership, with both internal and external stakeholders. These values need to go beyond traditional private sector hype and to be meaningful would require regular independent audits.
Improving performance is critical. Getting the fundamentals right is the rock on which everything else should be built, and if Northern Railways can offer high quality and reliability they will be in a strong position to develop further. Nobody wants to be associated with a poorly-performing operator, however nice the branding is.
Environmental sustainability should be fundamental to the social goals of Northern Railways, reinforced by best practice in all aspects of its operations - in particular energy and fuel use, which bring down operating costs.
Northern Railways would be a major employer, with about 6000 employees. Many of its staff would have both safety-critical and sensitive customer-facing roles. High levels of training are essential combined with an inclusive approach towards recruitment (including above – employing ‘hard to reach’ sections of the community). Encouraging employee involvement in community activities, with agreed time off for volunteering should be a key aspect of what NR offers to its employees.
Finally, Northern Railways should operate as a responsible business with its customers – above all passengers – but also its supply chain. Ethical procurement policies should include a presumption of buying local, encouraging positive and fair commercial relationships, supporting small businesses and in particular social enterprises. The buying power of a large business such as Northern Railways could be used to help small social enterprises and community organisations. Northern Railways should aim to score consistently high in Passenger Focus’s passenger satisfaction surveys[7].
Financial Questions
The current subsidy given to the Northern and TransPennine Express franchises, including indirect support via Network Rail’s grant, totals £936m per annum[8]. In addition, substantial investment is being made in infrastructure through Government proposals for electrification and ‘the Northern Hub’. The proposed social enterprise train operating company does not impact massively on this current arrangement, though the assumption is that funding the future franchise (or whatever it may become) will be via the Northern authorities, represented by RN. An additional advantage of moving away from a franchising model is that the costs of managing a franchise – which are considerable – will be reduced. Whilst there would be some up-front costs in setting up the company, and further costs in monitoring and liaison, these are likely to be lower than the current costs of franchise management.
Northern Railways would continue to receive a considerable financial subsidy from RN(or DfT) which would take the revenue risk. It should be encouraged to make a surplus from extending and improving its commercial performance and this surplus would be re-invested into the business through improvements such as station facilities, improved information and on-train services - not to shareholders. Neither should there be a culture of excessive executive bonuses (see below).
Creating a real People’s Railway: Community and ‘Northernity’
The privatised railway in the UK has recognised the importance of community involvement in its operations, at least for local and regional services. However, there has been a sense that these are marginal, particularly for some of the longer-distance operators. And the reality of running a complex, long-distance network means that any consultation process, or community involvement, has inevitable limits.
So what could Northern Railways do that would really make a difference and give a sense of ownership and involvement? There is a complex relationship between physical size, identity and sense of owning/belonging to something. British Railways was technically ‘owned’ by the people of Great Britain but the size was so great – coupled with a fairly top-down approach anyway – that a sense of ownership was impossible to develop. Amongst employees there was a degree of identity with ‘BR’ but it was more about a sociological ‘industry’ identity, which has persisted, despite the efforts of many companies, after privatisation.
A good comparator is Merseyrail, a franchise owned by Serco and Abellio and specified by the PTE, Merseytravel. The size is ideal for developing a strong sense of identity and loyalty. Trains and stations are strongly branded and relate strongly to a sense of local identity. Northern Railways would be in a similarly strong position to take advantage of its ‘Northernity’ in a way that the current jointly-owned Northern and TPE never have been. Building up a strong identity not only as a Northern enterprise, but as one that is the property of the people of the North, offers the sort of advantages that PR people can only dream of.
The ‘branding’ of Northern Railways should be unequivocally Northern. The public image of Northern Railways should be designed to reflect a modern take on the North, promoting a sense of community as well as heritage. The profile of Northern Railways should extend to every part of the North, not just stations and trains. It should have a high profile at major events, e.g. festivals and major sporting events but also more local community galas, concerts and celebrations. It should be a sponsor of a range of national and local events and community activities with a substantial ’communities’ budget.
The direct ‘offer’ of Northern Railways should symbolise that this is a very different railway company. Stations should be part of the community, building on the success of the ‘adopt a station’ approach but going much further, with station buildings used for community activities. Where station buildings have been destroyed, there should be a programme to re-build stations with facilities that are more than ‘fit for purpose’ and incorporate retail and community facilities where appropriate. Northern Railways should have a ‘High Street’ retail presence at larger towns and cities (including London and Edinburgh as well as within the North), not only selling travel products but tourist goods from across the North. It should develop a ‘special trains unit’ to provide, on a fully commercial basis, additional services for special occasions (e.g. major sporting events and concerts) or private charter work. Northern Rail currently does this on an ad hoc basis and there is almost certainly a suppressed demand for larger group travel (but less than full ‘charter train’ length).
Extending the community rail partnership/station adoption model
There are over 20 well-established community-rail partnerships (CRPs) across the North including The Penistone Line (Huddersfield – Sheffield); Cumbrian Coast (Carlisle – Barrow); East Lancashire (Preston – Colne); Fylde Coast (Preston – Blackpool); Esk Valley (Middlesbrough – Whitby) and Mid-Cheshire (Manchester – Chester).
The partnerships should be encouraged to develop their activities further, with additional (and long-term, secure) funding. Their current management varies but most have strong local government involvement, which is of critical importance. The CRPs should look at ways to build on their current activities and identify new opportunities to develop links with local communities.An integrated ‘local sustainable transport company’ approach could be applied to several of these routes, including Esk Valley, Cumbrian Coast, and Penistone Lines initially. The LSTC concept is that of a local social enterprise providing a mix of road and rail-based transport services and possibly other revenue-generating activities.
In the case of some lines, e.g. Esk Valley or Cumbrian Coast, a route-based co-operative or mutual enterprise could be formed to promote and develop peripheral services that capitalise on the line’s tourist potential, and possibly bring retail staff back to stations. It is noteworthy that Chester-le-Street is already operated by a private company and Millom is run by a social enterprise. The Settle-Carlisle Railway Development Company manages station booking offices at Settle and Appleby.
Relationship with central government
The DfT is taking a positive approach towards devolving more responsibilities to regions and nations within the UK, so a move towards much greater control of the Northern franchise by the RNconsortium will not, in itself, be a problem. The proposals in this paper are to work within the existing legislative confines – if Labour does form a government in 2015 it would be too late to significantly change the ground rules for the new Northern franchise, even though it would still have several months before the bidder is announced.