The transport secretary, Chris Grayling, has dismissed repeated calls from the mayor of London, Sadiq Khan, for Transport for London (TfL) to take over the troubled Southern Rail network, which has been hit by strikes, overcrowding, delays and cancellations. Grayling rejected Khan’s offer because “I don’t believe that TfL has the skills to run the mainline.”
Instead, Grayling announced his own “hit squad” and a £20m fund to improve Southern. Meanwhile, the company running Southern has just announced a jump in profits of 27% – although a glance at the accounts of the parent company, which also operates bus routes in London, suggests Southern specifically made no profit.
Southern’s customers aren’t happy and many must hope following Khan’s call that TfL could transform the commuter line as it did the London Overground. But this cannot be done overnight and a TfL takeover is not a quick fix.
The problems on the Southern network run deeper than the disputes between train operations management and the unions, who Grayling blames for the chaos. The services started to crack and crumble as issues such as driver and rolling stock shortages were not addressed and grew worse. Fixing it will be a long game – even for TfL.
Debating rail devolution
The debate around devolving rail services in London is not new – and TfL has had its successes. TfL’s takeover of underperforming inner-city London lines to create the London Overground resulted in frequent, reliable train services, with clean and staffed stations.
Following this transformation, many have been calling for more control of London’s railways to be devolved from national to city government. Additionally, the Brown Review on Rail Franchising in 2012 suggested control of franchising might be best devolved from national government.
In response, former mayor of London, Boris Johnson, published his 2012 Mayor’s Rail Vision. It proposed devolution of management of two London rail networks – West Anglia and Southeastern – to TfL.
This proposal was partially successful. On May 31 2015, Transport for London took over management of West Anglia, which runs out of Liverpool Street station to Cheshunt, Chingford and Enfield in north-east London. Stations along the route have been rebranded, staffed and refurbished to meet TfL standards. Inherited trains have been revamped and new trains are due in 2018.
The proposal to take over Southeastern was, however, unsuccessful. This was partly because of concerns over TfL running services beyond the Greater London jurisdictional boundary and the resulting democratic deficit. Grayling echoes this in his response to Khan’s suggestion that TfL should take over Southern – which goes to Southampton, Brighton and Hastings. This would mean TfL and the mayor taking over control of rail links far beyond the Greater London boundary.
More recently, the London Assembly’s Transport Committee and think-tank Centre for London also made the case for South London’s rail services, including Southern services within London, to be devolved to make best use of the existing infrastructure.
The proposals suggest that current rail networks out of London rail termini should be split: suburban routes contained within London would go to TfL, while long-distance or inter-city services would be let via a franchise by the Department for Transport. As yet, however, no agreement has been made.
A magic bullet?
The prospect of TfL taking over more rail services around London is appealing to passengers. Who would not want better train services and stations? And with rapid population growth and employment centralisation in London, demand on the city’s transport arterials is ever growing.
Large infrastructure projects such as Crossrail and Crossrail 2 are expensive and disruptive, so the ideal would be to better use existing infrastructure. TfL is well placed to take on that coordinating role – but the transformation observed on the London Overground orbital was years in the making and required substantial investment.
Rail services in and around London are currently provided by a plethora of different train operating companies and TfL. The quality of service varies hugely from some of the worst performers in the country (Southeastern and Southern) to one of the most popular (Chiltern Railways). As the London Assembly’s Devolution Group argues, this fragmentation hinders greater integration of the transport network in and around London and the provision of a good transport service.
Who runs the trains?
Contrary to what the brand suggests, TfL does not run rail services, such as the London Overground, itself. All of the London Overground is run by a private train operating company: London Overground Rail Operations Ltd (LOROL). And in November, Arriva will take over the operation of the service.
Like the national government’s Department for Transport, TfL contracts out the provision of this service. But while most services around the country are contracted out via a franchise agreement of around five to seven years, TfL uses a different model to manage its rail services: a concession or “gross cost” contract.
The key difference is that TfL takes on the risk of ticket sales – instead of the operator. TfL pays the operator a set fee for running the service with financial incentives for strong performance – equally, it imposes penalties for underperformance. Extra payments also go to features TfL has identified as improving journey experience such as station staffing and good quality station environments. An example of this greater focus on the customer is the new concession for London Overground which stipulates more stringent punctuality metrics. In the concession model, the operator is like an employee with a regular wage and potential performance bonus.
By comparison, in the franchise model, the operator takes on the risk of uncertain passenger numbers and ticket sales. This means its financial performance is directly linked to sales rather than the delivery of a punctual, reliable service. To “insure” itself against the possibility of lower than expected ticket sales, the operator can charge more for the provision of the service than under the TfL concession model.
Due to its size and the fact that it covers most of the transport network in London, TfL is in a good position to take on the revenue risk. As the integrated transport authority, TfL can also take a more holistic view and manage the network to respond to growing demand. It can focus more on the quality of the service provided.
Southern is part of a recently created mega-franchise including Thameslink from Bedford to Brighton, and Great Northern to Cambridge and Peterborough. Issues such as complex engineering projects at London Bridge station and along London’s new rail route, Crossrail, were set to impact the franchise network and made it a risky proposition for bidders. Consequently, an unconventional model was adopted by the DfT for this mega franchise, which applies for the next few years. Instead of collecting ticket sales, it would run the rail service for the DfT for a charge for the duration of the franchise. This arrangement sees the train operator accountable to national government, rather than passengers or metropolitan government, as in the models outlined above.
A long game
But there’s a problem with Sadiq Khan’s plan to hand the Southern network to TfL. Because TfL does not run rail services itself, there is no team that could step in immediately to resolve the Southern headache. Indeed, based on the West Anglia experience, TfL estimates it needs approximately two years to prepare to take over control of a London rail network.
Securing a new operator alone is a lengthy process: it took a year from TfL advertising for a new London Overground operator to announcing a successful candidate this spring.
Even taking over the South West network – the franchise is up for renewal in 2017 – is too soon for TfL. Southeastern looks to be next feasible take over candidate for TfL. Its current franchise expires in 2018.
Planning and agreeing the terms of a concession contract are important and cannot be rushed as they are the cornerstone of whether the rail service will be successful. TfL has managed to build on success and establish a reputable brand. A rushed takeover could undo all this. For now, it seems, there are not quick fixes.