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The Department for Transport: Letting Rail Franchises 2005-2007 - Public Accounts Committee Contents
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Supplementary memorandum from the Department
for Transport
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Questions 14-16 (Chairman): Service improvements contracted in the new East Coast franchise
The Chairman asked what improvement had been
contracted in the new East Coast Franchise, compared to the service
contracted with GNER. These are set out in the following table.
Services may of course be offered which are above the contracted
minimum where the company believes there is a commercial case.
| Summary Description | Due Date |
| New and additional Services Introduction of a new two hourly direct service between London and Lincoln and a new two hourly London to York service calling at intermediate stations, giving good connectivity whilst enabling trains between London and Leeds, York, Newcastle and Scotland to be accelerated. An increase in weekday trains from 136 to 161. Circa 8,000 additional seats each weekday. | December 2010 |
| Better Performance Commitment to improve performance with nine out of 10 trains running on time. | January 2010 |
| Passenger Compensation Introduction of a "Delay Repay" passenger compensation scheme with refunds of: 50% of the price of a single-leg journey delayed by 30-59 minutes 100% of the price of a single-leg journey delayed by 60-119 minutes 100% of the price of a return journey delayed by more than 119 minutes | Ongoing |
| Committed Obligation Introduce a dedicated Franchise website providing the following functions: (a) information on fares including for different times of travel; (b) information about expected crowding levels; (c) ticket booking; (d) seat choice; (e) taxi pre-order. | Website in place at the start of the franchise, currently being enhanced to include all of the items on the left by 31 July 2009 |
| Committed Obligation Introduce facilities to allow passengers to: (a) print tickets at home; and (b) display travel authorisations on mobile telephones. | Completed |
| Committed Obligation Employ 20 persons accredited by British Transport Police, (pursuant to the Railway Safety Accreditation Scheme Regulations 2004). | 30 April 2009 |
| Committed Obligation Implement a system that permits a passenger to submit feedback to the Franchisee by text message from their mobile telephone. | Pilot system in place, full system by 31 January 2009 |
| Committed Obligation Implement a system that permits a registered passenger to be sent journey alerts by the Franchisee by email or text message. | Complete |
| Committed Obligation Install electronic posters at all Stations plus Kings Cross, Leeds and Edinburgh. | 31 March 2009 |
| Committed Obligation Implement a system that permits passengers to be sent timetable information by message to their mobile telephone. | Complete |
| Committed Obligation Install "Smart Columns" at all Stations plus Kings Cross, Leeds and Edinburgh. | 30 April 2009 |
| Committed Obligation Introduce a system offering passenger a refund of fare for the journey leg if the Franchisee is unable to fulfil their seat reservation. | 31 July 2009 |
| Committed Obligation Provide wi-fi enabled PDAs to Customer Operations Leaders, so that each is issued with one. | 30 April 2009 |
| Committed Obligation Installation of additional CCTV cameras at stations. | 30 June 2009 |
| Committed Obligation Commission comprehensive reviews of security arrangements twice, once during the period 2008-09, and once during the period 2011-12. | (i) by 31 December 2009 (ii) by 31 December 2012 |
| Committed Obligation Provide an additional 465 cycle parking spaces at stations. | 31 March 2010 |
| Committed Obligation Repaint stations, replace station signage, restore existing station seating and install additional seating. | 31 March 2009 |
| Committed Obligation Enhance facilities at Newcastle station including the entrance and lighting. Upgrade the station toilets and provide a disabled toilet. | 30 June 2010 |
| Committed Obligation At Grantham station enhance the station lighting and install 6CCTV cameras. | 30 June 2010 |
| Committed Obligation At Retford station upgrade waiting shelters and refurbish toilet facilities. | 30 June 2010 |
| Committed Obligation At Doncaster station upgrade the station frontage, upgrade Standard class waiting facilities and refurbish toilets. | 30 June 2010 |
| Committed Obligation At Durham station upgrade waiting rooms, underpass lighting and create a safe walking route to the car park. (a) upgrade waiting rooms and areas; (b) enhance lighting in the station underpass; and (c) create a safe walking route to the car park for passengers. | 30 June 2010 |
| Committed Obligation At Dunbar station replace/revise the existing entrance doors and redecorate/refurbish the subway entrance to the station. | 30 June 2010 |
| Committed Obligation At Darlington station redecorate and deep clean the existing footbridge, install seven CCTV cameras, enhance the station entrance turning circle area, deep clean and redecorate the existing subway and refurbish toilet facilities. | 30 June 2010 |
| Committed Obligation At Peterborough station refurbish the waiting room on platform 4/5, upgrade lighting, re-coat and maintain non-slip coating on the passenger footbridge. | 30 June 2010 |
| Committed Obligation At York station use floor media on the over bridge in order to create a laned flow, enhance lighting and refurbish the ATM unit. | 30 June 2010 |
| Committed Obligation At York station the Franchisee shall create a new waiting area including a first class lounge. | 30 June 2010 |
| Committed Obligation Introduce peak time "traffic wardens" at Peterborough and York stations as a pilot scheme for 18 months. | Wardens in service |
| Committed Obligation Introduce through bookings onto National Express coach services from Stevenage to Luton and Stansted airports, marketed as a "rail-air coach link". | 31 January 2009 |
| Committed Obligation Provide 250 additional car parking spaces across the route, (excluding York, Peterborough and Wakefield stations). | 30 June 2009 |
| Committed Obligation Provide 200 additional car parking spaces at York station. | 31 March 2010 |
| Committed Obligation Provide 400 additional car parking spaces at Wakefield Westgate in a potential new car park being developed adjacent to the station. | 1 April 2011 |
| Committed Obligation Provide 1,000 additional car parking spaces at Peterborough in a potential new car park being developed adjacent to the station. | End of Franchise Term |
| Committed Obligation Procure and deploy 81 new mobile ticket machines. | Completed |
| Committed Obligation Procure and deploy automatic ticket barrier gates at the following stations: (a) Grantham; (b) Newark Northgate; (c) Wakefield Westgate; (d) York; (e) Darlington; (f) Newcastle; (g) Durham; and deploy manual barriers at Peterborough and Doncaster Stations. | 30 September 2009 |
| Committed Obligation Provide free wi-fi to First and Standard class passengers within all trains (as comprised in the Train Fleet at the Start Date). | Completed |
| Committed Obligation Commence providing annual customer conferences, and continue while customer feedback indicates they are valued by customers. | Completed |
| Committed Obligation Written correspondence from customers including emails/web forms fully responded to within 10 Weekdays. | 31 October 2008 |
| Committed Obligation Introduce an "Adopt a Station" scheme for Dunbar, Berwick-upon-Tweed, Retford, Newark and Grantham. | Completed |
| Committed Obligation Procure and deploy 36 new Ticket Vending Machines. | 31 December 2009 |
| Committed Obligation Implement smartcard back-end functionality, and smartcard front-end functionality at Stations for: (a) ticket vending machine fulfilment; (b) Avantix Mobile fulfilment and validation; (c) Tribute fulfilment; and (d) gate validation. | 31 December 2009 |
| Committed Obligation Introduce smartcard option for season tickets. | 31 January 2010 |
| Committed Obligation Retain "Investors in People" accreditation throughout the Franchise Period. Conditions None. | Ongoing |
| Ongoing Committed Obligation Commence and continue providing conflict avoidance training for non-office customer facing staff. | Ongoing |
| Committed Obligation Commence performing annual surveys of all Franchisee employees. | Ongoing |
| Committed Obligation Achieve Station Quality Management System compliance scores of: (a) 90% for stations; (b) 80% for trains; (c) 90% for people under the Service Quality Management System. | 31 April 2010 |
| Committed Obligation Provide enhanced operational training for senior managers. | Completed |
| Committed Obligation Introduce Franchisee "Momentum Project" to schools. (Enhances environmental awareness). | Ongoing |
| Committed Obligation Commence holding annual stakeholder forum meetings. | Ongoing |
| Committed Obligation Financially support Community Rail Partnership activity to the value of £60,000 pa. | Ongoing |
| Committed Obligation Implement package of modifications to Class 91 locomotives to enhance reliability. | 31 October 2009 |
| Committed Obligation Implement package of modifications to Mk IV vehicles comprised in the Train Fleet to enhance reliability and provide full internal CCTV coverage plus forward facing CCTV. | 31 October 2009 |
| Committed Obligation Complete HST power car refurbishment/re-engine programme commenced under Previous Franchise Agreement. | 31 October 2009 |
| Committed Obligation Implement package of modifications to HST sets of vehicles comprised in the Train Fleet to enhance reliability and provide full internal CCTV coverage plus forward facing CCTV. | 28 February 2009 |
| Committed Obligation Introduce a "Carbon Club" through Franchisee website. | Completed |
| Committed Obligation Commence annual reporting of environmental indicators. | 9 March 2008 then annually by 28 April each year |
| Committed Obligation Expend £400,000 on small schemes to reduce energy use at stations and depots. | 31 December 2009 |
| Committed Obligation (a) Designate four Stations as `Green Stations' and introduce solar power generating at each; and (b) install 8 (in total) small and 3 (in total) large wind turbines to serve Stations and/or Depots. | Aberdeen Clayhills depot and/or Ferme Park depot—31 March 2009; and/or Neville Hill—31 March 2011; and Stations—31 December 2009. |
| Committed Obligation Reduce the quantity of non-hazardous waste disposed of by the Franchisee going to landfill by 50% from 2006 levels of approximately 3,500 tonnes. | 31 March 2010 |
| Committed Obligation Install rainwater harvesting facilities at the following depots: (a) Aberdeen Clayhills; (b) Ferme Park; and (c) Neville Hill. | Aberdeen Clayhills and Ferme Park—31 March 2009; Neville Hill—31 March 2011. |
| Committed Obligation Reduce water consumption by 5% from 2006 levels of approximately 150,000 cubic metres. | 30 September 2011 |
| Questions 23-35 (Keith Hill): Capacity and growth figures |
1. This additional note is intended to clarify some of
the points made by the Committee, which may rest on a misunderstanding
of the language around demand, capacity and growth which is used
in the report.
2. The growth figures which were highlighted by Mr Hill
in paragraph 2.4 are revenue growth predictions.[8]
These are the train operators' own predictions as set out in their
bids. As the report indicates, DfT has its own internal projections
of likely revenue growth which may differ from those of operators.
It is also true that train operators are likely to revise these
estimates as the business develops, and have contingency plans
(such as reducing costs) if the levels of growth do not materialise.
3. The July 2007 White Paper Delivering a Sustainable
Railway said that the Government "wants the industry
to be able to accommodate a 22.5% increase in passenger demand
by 2014". This is the figure referred to in paragraph 3.5
of the NAO report. This uses passenger kilometres as the measure
of demand. It is based on the total kilometres travelled by passengers
on the English/Welsh railway network in 2007 (shortly before the
publication of the White Paper). This target was broken down by
Network Rail route in the accompanying High Level Output Specification
(HLOS). HLOS also specified levels of peak demand to be accommodated,
alongside specific loading factors at busy stations (for instance
a increase of 5,300 additional passengers arriving at London Victoria
in the three hour peak, with a maximum average load factor of
67% by 2014). These targets are set out individually for the biggest
commuter centres: London termini, Birmingham, Cardiff, Leeds,
Manchester. More detail is available in the White Paper and the
HLOS, which is driving infrastructure improvements and the construction
of 1300 new trains by 2014.
4. The capacity percentages set out in table 11 on page
20 of the NAO report were prepared on the basis of a different
measure. Table 11 counts the total number of passengers that can
be carried by the available fleet (seating plus a standing allowance)
as a snapshot—for instance if it were all parked in the
depot. This measure is relatively simple to calculate and understand,
but misses many of the key variables of capacity in practice.
The capacity which is available to passengers during a three hour
peak will depend on the timetable, the calling pattern and the
rolling stock, with many trains being used more than once. The
increase of 22% in this fleet capacity by 2014 is therefore not
comparable to the detailed peak targets in the HLOS or to the
overall aim to accommodate an all-day increase in passenger kilometres
of 22.5% by 2014.
Questions 75-78 (Mr Mitchell): Extending National Express East Coast services to Grimsby
1. DfT did not specify in our Invitation to Tender (ITT)
that the new ECML operator should serve Lincoln. The ITT asked
for a fifth train per hour to provide additional capacity on the
main line, and particularly to serve Grantham, Newark and Retford
so that trains to Leeds/Newcastle/Edinburgh could be speeded up,
but left it open for bidders to determine the origin/destination
of the fifth train. The ITT said:
- "of the five trains, four are expected to provide limited-stop
fast services: two to York and beyond, and two to Leeds. The fifth
train is designed to provide an hourly service calling at all
intermediate stations between Peterborough and Doncaster; bidders
must suggest suitable destinations for these paths that maximise
the financial value;"
2. Such specification decisions are based on a consideration
of the core objectives of the franchise, affordability, value
for money for the taxpayer, operational factors (such as the size
of the fleet) and the other services offered in the region.
3. NXEC, as the winning bidder, proposed that the fifth
train should run in alternate hours between Kings Cross and York
or Lincoln. DfT contracted on this basis as an intrinsic part
of their overall bid. The bid states that they had examined running
to Grimsby or Cleethorpes but found that these extensions of the
proposed Lincoln services did not have a positive business case
so were not included in the bid.
4. NXEC's bid, including the proposed two-hourly Kings
Cross-Lincoln service was contractualised in the franchise agreement.
Implementation is dependent on NXEC acquiring the necessary access
rights and the Office of Rail Regulation will announce its decisions
on the allocation of ECML access rights at 10.00 on Thursday 29
January 2009.
5. Once the core timetable has been developed it is possible
that NXEC might be open to considering extending some services
to Grimsby or Cleethorpes, subject to their assessment of the
practicalities and costs (for instance additional rolling stock
and train crew). This is a matter for the operator.
Questions 80-92 (Mr Bacon): Contracted subsidy year by year
for all franchises
CURRENT FRANCHISES
SCHEDULE OF
PREMIA/SUBSIDY
TOC name | Franchise Agreement Commencement | Price Base | 2007-08 | 2008-09 | 2009-10 | 2010-11 | 2011-12 | 2012-13 | 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 |
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Arriva Trains Wales | 08/12/2003 | 2003-04 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | 2,927,000 | |||
| c2c Rail | 26/05/1996 | Feb 1996 | 13,584,000 | 12,751,000 | 11,970,000 | 11,236,000 | |||||||||||
| Chiltern Railways | 03/03/2002 | 2002 | 9,145,527 | 2,975,639 | -320,116 | -2,653,913 | -4,559,466 | -6,532,075 | -8,705,725 | -11,627,678 | -14,977,586 | -18,139,357 | -21,142,988 | -24,377,899 | -27,716,185 | -30,926,556 | -29,559,997 |
| First Capital Connect | 01/04/2006 | Nov 2005 | -45,770,618 | -66,509,871 | -81,662,388 | -103,300,957 | -127,176,667 | -150,617,555 | -179,212,905 | -205,925,246 | -127,671,772 | ||||||
| First Great Western | 01/04/2006 | Nov 2005 | 46,674,000 | 14,538,000 | -20,163,000 | -111,016,000 | -168,296,000 | -233,277,000 | -302,151,000 | -363,855,000 | -427,726,000 | ||||||
| Gatwick Express | 28/04/1996 | Feb 1996 | -17,884,000 | -19,412,000 | -21,026,000 | -22,645,000 | |||||||||||
| Northern Rail | 12/12/2004 | Mar 2004 | 325,475,270 | 333,903,518 | 332,320,182 | 330,686,336 | 328,794,987 | 327,349,051 | 326,309,067 | ||||||||
| ONE Railway | 01/04/2004 | Nov 2003 | -60,938,854 | -75,601,999 | -82,462,560 | -90,035,790 | -97,147,993 | -105,980,259 | -115,962,772 | ||||||||
| South Eastern | 01/04/2006 | Feb 2005 | 114,117,319 | 100,273,000 | 126,058,406 | 107,665,918 | 65,177,466 | 24,672,519 | -9,310,498 | ||||||||
| South West Trains | 04/02/2007 | Jan 2006 | 74,797,000 | 28,033,000 | -36,337,000 | -80,694,000 | -132,890,000 | -191,202,000 | -241,737,000 | -286,596,000 | -334,502,000 | -323,420,000 | |||||
| Southern Trains | 26/05/1996 | Dec 2001 | 91,229,382 | 80,837,293 | 57,282,000 | ||||||||||||
| TransPennine Express | 01/02/2004 | Apr 2001 | 96,937,716 | 93,478,849 | 91,786,054 | 90,271,015 | 74,300,734 | ||||||||||
| Arriva Cross Country | 11/11/2007 | Feb 2007 | 98,320,000 | 245,092,000 | 222,156,000 | 190,168,000 | 156,152,000 | 113,911,000 | 77,691,000 | 48,609,000 | 44,346,000 | 5,649,000 | -57,884,000 | ||||
| Virgin West Coast | 09/03/1997 | Mar 2006 | 274,554,000 | 294,622,000 | 243,672,000 | 205,331,000 | 172,135,000 | ||||||||||
| East Midlands Trains | 11/11/2007 | January 2007 | 35,651,000 | 63,390,000 | 36,112,000 | 2,675,000 | -36,405,000 | -64,000,000 | -79,477,000 | ||||||||
| London Midlands | 11/11/2007 | January 2007 | 78,284,608 | 198,307,266 | 192,540,100 | 174,125,398 | 161,730,387 | 154,014,332 | 147,592,222 | ||||||||
| NXEC | 09/12/2007 | January 2007 | 6,742,432 | -84,756,464 | -133,162,098 | -178,686,551 | -228,568,603 | -300,598,928 | -346,156,559 | -394,721,827 |
All amounts are in REAL terms. The analysis relates to basic payments and excludes any potential adjustments such as 18.1, benefit share etc.
Negative figures indicate a premium payment to the Department
Figures for Ariva trains Wales show payments due from the Department for Transport The bulk of this franchise is funded by the Welsh Assembly Government.
Payments to PTEs in respect of Centra and Northern are not included In this table.
This table shows contracted subsidy levels. It does not take account of any changes arising from the ORR's regulatory review for Control Period 4, and does not take account of any alterations to subsidy which may be made under the provisions of revenue support and share set out in the franchise agreement.
Questions 96-98 (Mr Bacon): Catering services: National Express East Anglia (NXEA)
1. NXEA has two obligations in its franchise agreement
with regard to catering:
Stansted Sky Train Services
"The Franchisee shall, for the whole of the Franchise
Term, provide and maintain on-board catering facilities on the
Passenger Services from London Liverpool Street to Stansted and
Stansted to London Liverpool Street (the Stansted Sky Train Services).
The on-board catering services offered on the Stansted Sky Train
Services shall be of a standard at least equivalent to the level
of catering services provided on commercial flights provided by
reputable airlines."
Norwich to London Service
"The Franchisee shall, for the whole of the Franchise
Term, provide and maintain on-board catering services on the Passenger
Services from London Liverpool Street to Norwich and Norwich to
London Liverpool Street (the Norwich Services). The on-board catering
services on the Norwich Services shall, as a minimum, include
a trolley service offering light refreshments."
2. NXEA is proposing to withdraw the restaurant facility
from its Norwich services by the end of February. This will be
replaced by an "at seat service" that is currently being
trialled. There is no contractual requirement for NXEA to continue
to operate the restaurant service. Confusion has arisen for two
reasons:
- — At franchise award, National Express issued a
press release that announced, among other things, that they would
continue to operate the restaurant service.
- — The "Agreed Form" passengers' charter
(included in the Franchise Agreement) also includes a commitment
for the continued operation of the restaurant service. NXEA has
requested a change to the charter. DfT is under a legal requirement
to enforce the franchise agreement reasonably, and our view is
that this change cannot reasonably be refused as the commitment
in the agreement explicitly and inarguably requires only a trolley
service.
3. NXEA is the only operator that currently offers a
restaurant service, other than a few services on NXEA.
4. The Department has typically not specified catering
services in more recently-let franchises. Operators have been
left to reach their own commercial judgment about what sort of
catering services cover their costs—either directly or indirectly
(by attracting more customers or generating more high-value ticket
sales).
Questions 106-113 (Mr Bacon): Value of bonds and the DfT process of assurance
1. The latest example of the internal Periodic Bond Report
is separately attached to this letter.[9]
The ratings of the bond issuers as set out in the report are publically
available. However the value of the bonds is a commercial matter
between the operators and their bond issuer.
2. This report is produced for review every 4 weeks.
However the Bloomberg service monitors ratings daily, and informs
DfT immediately if there are any changes to the ratings. If any
such change caused concern, senior DfT staff would be alerted.
3. The bond report includes both season ticket and performance
bonds. In the event of a company ceasing to be a franchisee, the
season ticket bond allows the Department to claim an amount equivalent
to the amounts paid in advance by passengers for season tickets.
This is estimated at a different level for each operator and adjusted
annually. The performance bond is intended to cover the Department's
costs arising from a company failure, such as re-franchising.
4. It is important to note that the Department may negotiate
another solution with the company concerned to cover the costs
of DfT and ensure that season ticket revenue is not lost to the
railway. This is what happened in the case of GNER. It is therefore
not necessary to call on these bonds in all cases where a franchise
contract is terminated.
5. The attached report[10]
analyses the different bonds by provider. It gives the date of
the issue of the bond as well as the expiry date, bond value and
potential maximum future value of bond. Each bond also has the
latest Standard & Poors rating. It should be noted that no
bond has a rating below AA-. On the last page of the report is
a rating of all bond providers by the main rating providers: Standard
and Poors, Fitch and Moodys.
Questions 162-170 (Mr Bacon and Geraldine Smith): Changes to the conditions of period return tickets
1. Given the strong feelings expressed by Committee members
regarding the change of conditions relating to the sale of "Anytime"
rail tickets, Mike Mitchell has raised the matter with the Association
of Train Operating Companies so that they may consider whether
any changes are required.
2. The fares simplification was developed by the Association
of Train Operating Companies, who consulted on the changes with
Passenger Focus. As Mr Mitchell said at the hearing, the Department
welcomes the overall package of changes, which has created a simpler
fares structure that is easier for passengers to understand.
3. The simplification process also sought to harmonise
the terms and conditions of different ticket types as far as possible.
Anytime day return fares have always been valid only on the date
of the ticket. Off-peak fares have also always had outward travel
valid only on the date of the ticket.Delete sentence. ATOC decided
that on balance the new Anytime period return should be consistent
with the majority of walk-up ticket types.
4. The change in conditions which requires a nominated
day of outward travel reduces the opportunity for ticket fraud.
Previously, an open return was valid on its outward and return
portion until clipped or retained by a ticket gate. Some passengers
might therefore be able to dishonestly use the same ticket several
times. By limiting the validity of the outward portion to the
stated day of travel, this risk is reduced.
5. The new conditions will undoubtedly require some types
of passenger to change their ticket buying behaviour, principally
those passengers (including many MPs) who bulk-buy open, peak-time
returns for use as-and-when needed. However, the change is not
equally important to all passengers. Other aspects of harmonisation
delivered important benefits, such as the acceptance of railcards
on all Advance tickets.
29 January 2009
8 Train operator revenue can increase due to a number of factors, including more passenger journeys, an increase in regulated fares (currently rising at RPI+1%), an increase in the face value of like-for-like unregulated fares, a change in the mix of fare types (such as more first class sold), a reduction in ticket evasion (for instance through station gating), or an increase in other sources of revenue such as advertising spaces and car parking. Back
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| © Parliamentary copyright 2009 | Prepared 19 May 2009 |