VIRGIN FOUNDER Sir Richard Branson has called for the Department for Transport to cancel all franchising competitions pending the outcome of the Rail Review by Keith Williams.
Virgin was a partner along with SNCF (French Railways) in the bid led by Stagecoach for the West Coast Partnership franchise, with the bid now confirmed as disqualified due to non-compliance concerning pensions.
Writing in an online blog on 1 May, Sir Richard recalled the controversy over the West Coast franchise bidding in 2012, under which a franchise was initially awarded to FirstGroup but subsequently cancelled. ‘Clearly there are still serious lessons to be learnt at the DfT’ Sir Richard wrote. ‘Instead of encouraging operators who are focused on customer service and innovation, its priority seems to be outsourcing as much risk as possible. Rather than advocates of customer experience winning franchises, we could end up with an industry run by actuaries.
All but the very biggest bidders, who can take these risks, could disappear, with the UK effectively outsourcing areas such as pensions risk to foreign governments. It is notable that the East Midlands franchise has been won by an arm of the Dutch government.
‘This outsourcing of risk has been layered on top of an already under-pressure franchising system.
The UK Government took control of the East Coast franchise last year after our forecasts for the franchise proved too ambitious and the additional capital we invested reached its limit. Our experience showed the need to be clear about risks upfront – what they are, what we can and can’t accept, and who is best able to manage them.’
Sir Richard added that recent developments had left him ‘with little confidence in the franchising system’, saying there are ‘serious questions to be answered around the East Midlands, South Eastern and West Coast franchise competitions’.
Sir Richard concluded: ‘When the Williams Rail Review was announced, the Government rightly cancelled the Cross Country competition. With two of the three outstanding competitions under a cloud, it is far from clear that any franchise can be let robustly as things stand. The DfT should take a pragmatic view and cancel all franchising competitions whilst Keith Williams does his vital work.’
Asked why the Department had chosen to continue awarding franchises before the Williams Review reported, Rail Minister Andrew Jones told the House of Commons on 23 April: ‘That was simply because it was considered that with the East Midlands franchise award and this one (the South Eastern franchise) we could get the benefits to passengers before the work of the rail review came into play.’
