1. It is now thirteen years since the Railways Act 1993 started the process of breaking up and privatising British Rail, replacing it with one company owning and managing the infrastructure,[1] an open-access system for freight services and a series of 25 passenger franchises let to private companies for a specified period of time. It has been thirteen years of almost continuous change.[2] The Hatfield crash in 2000 resulted in a period of crisis and upheaval culminating in the demise of Railtrack. Subsequently, the Strategic Rail Authority was abolished, with the strategic planning, franchise letting and monitoring functions brought back under the Department for Transport. We are now seeing the new 'triumvirate' framework with the Department for Transport (DfT), the Office of Rail Regulation (ORR) and Network Rail, bed in. The third generation of franchises are now being let, with the number being reduced to nineteen.[3]

2. The Railways have seen a high level of passenger growth in recent years and passenger numbers are expected to continue rising.[4] It is widely acknowledged that parts of the network are running close to capacity, and yet with more than £5.5 billion in subsidies for the railways, of which more than £1 billion will be for passenger rail services alone, direct public subsidies are forecast to reach their highest level ever in the financial year 2006-07.[5]

3. It is clear that the context and framework for the franchising system have changed very significantly in recent years, but the nature of franchises themselves has also changed since our predecessors last looked at passenger rail franchising in 2001-02. With a new thirty-year strategy for the railways, another White Paper for rail and a five-year purchasing strategy (known as the High Level Output Statement (HLOS)), due to be published in the summer of 2007, we decided to examine the functioning of passenger rail franchises. The inquiry addressed the following high-level questions:

a)  What should be the purpose of passenger rail franchising? Is the current system achieving that purpose?

b)  How well does the process for awarding franchises work?

c)  Are franchise contracts the right size, type and length?

d)  Do we need more competition and vertical integration?

4. The Committee is grateful to all the organisations and individuals who gave written and oral evidence to this inquiry. Written submissions are listed on page 56 and the names of witnesses who gave oral evidence are listed on page 55. We would also like to thank our specialist adviser, Professor John Preston, of the Transportation Research Group at the University of Southampton.

2   Q 301 [Ms Bonar, Chartered Institute of Logistics and Transport] Back

3   Ev 142 [Department for Transport] Back

4   Department for Transport Annual Report 2006, para 5.6 Back

5   Department for Transport Annual Report 2006, Figure 5d; see also Table 2 on page 21 Back