DEBATE PACK Number CDP-0119, 9 June 2016

By Louise Butcher

West Coast rail franchise

Contents

1. West Coast franchise - Summary current 2 1.1 The basics 2 This is a short overview of the issues that may be discussed in the debate in 1.2 Franchise specifications 2 Westminster Hall on 14 June 2016 between 2.30 and 4.00pm. The Member who secured the debate is John Stevenson MP (Con., ). 2. The next franchise 4 2.1 Refranchising process The InterCity West Coast franchise caters to more than 34 million journeys a and timetable 4 year, with 4.3 billion passenger miles travelled. The current franchise employs 2.2 Fares and ticketing 4 approximately 3,000 staff members and runs around 300 services per day. The 2.3 Stations 5 next operator will also have an important role to play in the effective delivery of 2.4 Effects of HS2 on High Speed 2 (HS2), with construction beginning in 2017. Euston 6 3. Parliamentary material 9 Further reading: HC Library briefing paper Passenger rail services (SN6521), 14 March 2016 HC Library briefing paper Rail fares and ticketing (SN1904), 3 March 2016 HC Library briefing paper Public Transport Fares (CBP7470), 18 January 2016 HC Library briefing paper Railway passenger franchises (SN1343), 14 December 2015 HC Library briefing paper Railways: (SN364), 13 March 2010

The House of Commons Library prepares a briefing in hard copy and/or online for most non-legislative debates in the Chamber and Westminster Hall other than half-hour debates. Debate Packs are produced quickly after the announcement of parliamentary business. They are intended to provide a summary or overview of the issue being debated and identify relevant briefings and useful documents, including press and parliamentary material. More detailed briefing can be prepared for Members on request to the Library.

www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary 2 Number CDP-0119, 9 June 2016

1. West Coast franchise - current 1.1 The basics Operating name: Virgin West Coast Franchisee: West Coast Trains Limited, owned by Virgin Group and Franchise start and end dates: March 1997 – December 2012 Direct Awards: (1) December 2012 – November 2014 (2) November 2014 – April 2018 Financial information: in 2014/15 paid a premium of £93.7 million, equating to a subsidy of -1.8 pppkm (pence per passenger km); in 1997 the total premia paid to the Government over the duration of the franchise was estimated be £933.5 million.1 The December 2015 InterCity West Coast Overview and Vision provides a summary of the route, its finances, passenger usage, performance and satisfaction. The National Franchise Terms that apply to this franchise, the Franchise Agreement and associated ancillary documents are available on the Gov.uk website. A map of the franchise can be found via this link.

1.2 Franchise specifications When the franchise was awarded in 1997 it was intended to deliver a number of commitments, including: • replacing virtually the entire rolling stock fleet with a brand new fleet of high speed 225km/h trains from 2011 onwards; • operating services at 200km/h starting in 2002; • examining the potential for new direct regular services between London, Telford and Shrewsbury, and to Blackpool; • undertaking studies into the viability of electrification of the Manchester-Preston-Blackpool and Crewe-Chester routes; • installing at-seat video systems and ‘in flight’ customer services; • providing fixed price pre-booked taxis from home to selected stations; • providing coach links between Watford Station and Heathrow Airport; • improving information systems/points at all major stations and spending at least £2 million on station improvements to include improved lighting, waiting facilities and access; and

1 ORR Data Portal and: OPRAF press notice, “High speed tilting trains to slash West Coast Journey times”, 19 February 1997

West Coast rail franchise 3

• achieving 90% punctuality for most services within a year from take-over.2 The franchise is currently operating under a Direct Award for the period November 2014 to April 2018.3 The Direct Award is intended to deliver: 21 first-class carriages converted to standard class, delivering 5,500 extra standard seats per day across the network free wi-fi at stations and improved coverage across the entire fleet more than £20 million invested to modernise and enhance stations, including improving waiting rooms, seats and shelters £2.5 million to improve the interiors of the Pendolino train fleet, as well as £2.75 million spent on improving catering facilities improved station cleanliness and accessibility new targets for passenger satisfaction, train punctuality and cleanliness plans developed to increase car parking at Carlisle, Lancaster and Stafford In addition, Virgin will now start work to secure new direct services between Shrewsbury, Blackpool and London from December […] The company has also committed to working with , communities and stakeholders to look at how further improvements in journey times can be made from London to Scotland. This includes work to remodel Carstairs junction – a significant bottleneck on the network […] As part of the deal the company has committed to employing at least 30 apprentices, 18 traineeships, four Network Rail Track and Train graduate placements, 12 Virgin Red Track scheme participants and 12 ex-offenders through the St Giles Trust.4

2 ibid., there were difficulties achieving some of these due to the overrun on the West Coast Main Line upgrade, see: HC Library briefing paper SN364 3 the Coalition Government secured an extension to the franchise between April and December 2012 and then signed a 23-month Direct Award until November 2014, see: HC Deb 27 October 2011, c20WS; HC Deb 15 October 2012, cc6-8WS; and DfT press notice, “ to run improved west coast services”, 6 December 2012 4 DfT press notice, “Better journeys for passengers on the West Coast Main Line”, 19 June 2014 4 Number CDP-0119, 9 June 2016

2. The next franchise 2.1 Refranchising process and timetable The Department for Transport issued a consultation on the scope of the new franchise on 10 May 2016. It will close on 2 August. The process for awarding the franchise is set out below:5

Franchise timetable • December 2015: Issue Overview and Vision Document Engagement Day • May 2016: Public consultation started • May – July 2016: Series of consultation events • June 2016: Bidder Day (for train companies to meet the DfT’s franchise team) and DfT issues Expressions of Interest to selected train companies • August 2016: Public consultation closes, DfT analyses responses • November 2016: Publication of Stakeholder Briefing Document outlining how responses to the public consultation have informed what DfT is asking for from the new franchise operator. DfT then issues Invitation to Tender (ITT) to short-listed bidders, setting out what they will be required to deliver and asking for proposals and costs for doing so. • November 2017: DfT awards contract for the new franchise to the successful bidder • November 2017 – March 2018: Handover from current operator • April 2018: New franchise starts

DfT’s ‘vision’ for the new franchise is to “deliver a rail service that: makes journeys better for passengers; works in partnership with communities to understand and support their needs and the towns it serves; and connects and helps grow and develop the current market to enable economic growth and support the long-term vision of HS2 services”.6

2.2 Fares and ticketing Around 45 per cent of fares are subject to regulation (by the Secretary of State in England and Wales and Scottish Ministers in Scotland). Regulated fares are set by a formula based on the RPI figure for the previous July, and for many years with a degree of flexibility (called the ‘fares basket’ or ‘flex’). All other fares are set commercially by train operators. The regulated fare increase for 2016 was 1% (based on an RPI +/-0 formula); the total fare increase was 1.1%. This disguises variations across different routes. Almost without exception, when the annual fare increases are announced every year passenger groups express concerns that significant increases could ‘price people off the railways’ and put a strain on those who use the railways to commute to work, particularly into and out of London. However, it has been the policy of successive governments to rebalance the funding of the railways between

5 DfT, Consultation: InterCity West Coast Rail Franchise, 10 May 2016, p31 6 Ibid., p4 West Coast rail franchise 5

passengers and taxpayers: reducing the relative contribution of the latter. A consequence of this is higher fares. The train companies themselves are keen to rebut claims that they are ‘profiteering’ off higher fares, noting that fares income is spent on upgrades and investment projects and, in some cases, is passed on to the Government as part of the financial package for the franchise. In terms of ticketing, successive governments, working with the industry, have made efforts to simplify the fares structure, though some passenger groups feel that it is still too complicated. In recent years, technological improvements combined in some cases with devolved decision making has led to the introduction of ‘smart’ ticketing across parts of the rail network, though there is concern about a lack of integration between these systems. The Government has also sought to promote ‘flexible’ ticketing, such as part-time season tickets and other innovations, but progress has been slow. The Government wants the new franchisee to provide passengers with all the information required to make a decision on when and how they travel: “This might include providing a range of fares which are clear, fair and consistent, and products that closely reflect the needs of passengers. We want the future train operator to deliver more flexible products that could benefit passengers, including the introduction of tickets that will benefit those who work or commute part-time and allow the costs of all season tickets to be spread out”. It also wants the new franchisee to improve passenger satisfaction in relation to fares, ticketing and retail by providing passengers with “widespread and easy access to the full range of tickets, ensuring that they have all the information they need to select and purchase the most appropriate ticket for their journey”. To achieve this, the future operator will be expected to work with partners to introduce more modern ways for people to pay for their journey. This includes: • improving station ticket retailing and the roles staff play; • increase the use of smart and digital ticketing (tickets stored on electronic devices) by ensuring availability across a wide range of media, for example smartphones, tablets or tickets that can be printed at home, etc. with the aim of withdrawing magnetic stripe ticketing for more innovative solutions; and • a simple and seamless experience for passengers, including where they interact with other operators and transport authorities as part of their journey.7 Virgin West Coast became the first franchised rail operator to offer m- Tickets for all ticket types and across all routes in February 2016.8

2.3 Stations The franchise currently directly manages the following 17 stations:9

7 Ibid., pp26-27 8 Virgin Trains press notice, “Virgin Trains heralds the end of the orange ticket”, 20 February 2016 9 Ibid., p10 6 Number CDP-0119, 9 June 2016

It also serves a further 32 stations which it does not manage, these are managed by other operators and Network Rail and are available to view here. Significant investment has already been made to improve a number of stations within the ICWC franchise area, including improvements to the station concourse and retailing, increased car parking provision, additional CCTV, security and help points and automatic ticket gating at a number of stations and the introduction of free Wi-Fi at all Virgin- operated stations by April 2016. The Government wants bidders for the new franchise to build on this by “focusing on those areas that will make the biggest difference to passengers, be they at small or large stations to improve the overall rail travel experience”. This will include improving signage and keeping all stations clean, tidy and well- maintained.10 While not mentioned in the consultation document, the concept of a residual value mechanism might encourage the new franchisee to make station (and other) investments which have a commercial return beyond the franchise term. This was encouraged by the January 2013 Brown review of rail franchising, which followed the last (failed) attempt to re-let the West Coast franchise in. Brown said: It is important that operators have the right incentives to invest across the life of the franchise. There will be circumstances where an operator wishes to invest in a project to improve efficiency or enhance revenue which has a commercial return partly or wholly beyond the franchise term. This is more likely to be the case in the latter period of the franchise as the window for return shortens, and is just as much an issue for longer franchises in their last few years as it is for shorter franchises.11

2.4 Effects of HS2 on Euston HS2 is the new north-south railway connecting London with the West Midlands (Phase 1) before running on to Manchester, Leeds and Sheffield (Phase 2). Construction is planned to begin in 2017. Phase 1 is intended to open in 2026, followed by the accelerated Phase 2a to

10 Ibid., pp23-24 11 The Brown Review of the Rail Franchising Programme, Cm 8526, January 2013, p33 West Coast rail franchise 7

Crewe opening in 2027 followed by Phase 2b in 2033. Its London terminus will be Euston. On 8 September 2015 the Government announced revised plans for the development of Euston. This involved the construction of 11 new platforms for HS2, to be built in two stages, with ‘at least’ 11 platforms remaining in the current station to serve the existing network, and new public spaces for shops, restaurants and cafes. The high speed station is intended to be delivered in two stages: The construction of six new high speed platforms and concourse to the west of the station to support the opening of HS2 Phase One (between London and the Midlands) high speed services in 2026 The construction of five further high speed platforms and concourse to support the opening of Phase Two (between London and Leeds/Manchester) high speed services in 203312 Parliament agreed Addition Provision 3 (AP3) relating to Euston on 15 September. This enabled the HS2 Committee to consider the plans with the rest of the route (see section 5, below). During the debate the Minister, Robert Goodwill, gave some more information on the platforms: I want to make it clear that for the existing west coast main line, the number of platforms will be reduced from 18 to 11, while the number for HS2 will increase from zero to 11. This means that there will be 22 platforms in total, which is four more than at present. The HS2 trains will also be longer, and the way in which they load their passengers will make it easier for people to get on them. That is because there will be a system similar to the one used by , in which passengers come down escalators on to the platforms. This will avoid the situation of everyone trying to rush down to one part of the platform as the train starts to load. 13 A Euston Integrated Programme Board has been established to consider integration of the HS2 side of the station with the classic services side of the station with public engagement. Members of the Board will include HS2 Ltd, Transport for London, the Greater London Assembly, Network Rail and Camden Borough Council. Interested parties met in February 2016 to determine the Board’s terms of reference and remit. Separately, the Euston Station Design Panel will examine the particular needs of the high-speed services station. These bodies will report to overarching strategic panels—the Euston Strategic Board and the Euston Station Strategic Redevelopment Board.14 David Brown, the chief executive of Go-Ahead, which operates the London Midland franchise out of Euston, warned of serious disruption as a result of the multi-year works at Euston. He said Go-Ahead were in discussions about how to manage the disruption, should HS2 go ahead as planned. In its financial statements, Go-Ahead said HS2 could “significantly impact on our ability to run our services reliably, meet

12 DfT press notice, “HS2 plans can unlock Euston potential”, 8 September 2015; an accompanying leaflet was also published 13 HC Deb 15 September 2015, c997 14 2nd Special Report - High Speed Rail (London–West Midlands) Bill Select Committee, HC 129, 22 February 2016, para 244 8 Number CDP-0119, 9 June 2016

contractual obligations, and performance targets, or damage customer reputation”.15

15 “Euston station upgrade risks years of misery, says train operator”, The Guardian, 18 February 2016 West Coast rail franchise 9

3. Parliamentary material

A full list of Parliamentary debates, questions and papers related to the West Coast franchise can be found via this link. A small selection of recent material is given below.

• Railways: Stafford Asked by: Lefroy, Jeremy To ask the Secretary of State for Transport, what steps he plans to take to improve the rail network and services between London and Stafford. Answering member: Claire Perry | Department: Department for Transport As part of the Rail Investment Strategy, Network Rail has delivered a package of major infrastructure improvements in the Stafford area. This includes the grade separation of Norton Bridge junction – which was been brought into use almost 12 months early this May – and has created additional capacity for services on the West Coast Main Line. Rail services between Stafford and London are currently provided by the West Midlands and InterCity West Coast franchises. These franchises are due be replaced when they expire in October 2017 and April 2018 respectively. The Department has completed a consultation in respect of the replacement West Midlands franchise, and commenced another in respect of InterCity West Coast earlier this month. The outcomes of those consultations will be published in due course. Looking to the future, HS2 will deliver high-speed services between London and Stafford from 2026. 07 Jun 2016 | Written questions | Answered | House of Commons | 38841 Date tabled: 26 May 2016 | Date for answer: 06 Jun 2016 | Date answered: 07 Jun 2016

• West Coast Railway Line: Coventry Asked by: Cunningham, Mr Jim To ask the Secretary of State for Transport, what assessment his Department had made of the capacity of rail services between Coventry and London; and if he will make a statement. Answering member: Claire Perry | Department: Department for Transport Rail services between Coventry and London are currently provided by the West Midlands and InterCity West Coast franchises. These franchises are due to be replaced when they expire in October 2017 and April 2018 respectively. The Department has completed a consultation in respect of the replacement West Midlands franchise, and commenced another in respect of InterCity West Coast earlier this month. The outcomes of those consultations, including the key challenges and opportunities that the Department has identified for those franchises, will be published in due course. 26 May 2016 | Written questions | Answered | House of Commons | 38057 Date tabled: 23 May 2016 | Date for answer: 26 May 2016 | Date answered: 26 May 2016

• West Coast Railway Line: Franchises Asked by: Cunningham, Mr Jim 10 Number CDP-0119, 9 June 2016

To ask the Secretary of State for Transport, what estimate his Department has made of the total number of its full-time equivalent officials who are working on the consultation on the InterCity West Coast rail franchise; and if he will make a statement. Answering member: Claire Perry | Department: Department for Transport The consultation process is being run by 1 FTE who is part of the ICWC franchise team, with a team of 3-6 officials assisting with each of the planned 11 station events which are scheduled to last between two and a half to four and a half hours each with 2-3 officials assisting at multi- stakeholder regional events also for between two and a half to four and a half hours each. 26 May 2016 | Written questions | Answered | House of Commons | 37953 Date tabled: 23 May 2016 | Date for answer: 26 May 2016 | Date answered: 26 May 2016

• West Coast Railway Line: Franchises Asked by: Cunningham, Mr Jim To ask the Secretary of State for Transport, what the total cost was of the InterCity West Coast rail franchise consultation; and if he will make a statement. Answering member: Claire Perry | Department: Department for Transport The InterCity West Coast rail franchise consultation launched earlier in the month and is due to close in August, so the total cost is not yet known. To date around £12,500 has been incurred to produce and distribute the consultation documentation and supporting materials in both English and Welsh. We will continue to engage with the public at events over the coming weeks and hope that they will make their views heard so that we can ensure that the next franchise truly meets their needs. We will also be holding regional events with stakeholders across the route over the consultation period providing opportunities for them to put questions to DfT officials to help inform their responses to the consultation. 26 May 2016 | Written questions | Answered | House of Commons | 37924 Date tabled: 23 May 2016 | Date for answer: 26 May 2016 | Date answered: 26 May 2016

• Rail Franchising I am pleased to inform the house that my department has published its refreshed programme for rail franchising. Through this my department is setting out an ambitious plan for new rail franchises that will give passengers high-quality rail services. It is making it clear to the whole rail industry that competition for rail franchises is the best way to secure services for passengers at good value for the taxpayer. Through our plan for the railways we are making journeys better for everyone – we are reducing crowding, cutting journey times and improving trains and stations across the country. This supports our regional economies, creating jobs and opportunities and connecting people to business. During this Parliament my department has already delivered the new Northern and TransPennine Express franchises which will oversee a West Coast rail franchise 11

massive £1.2 billion private-sector investment in our rail services. This includes hundreds of brand-new modern trains, thousands more seats, more services. Together this will deliver a modern, 21st century service for passengers, help to close the economic gap between north and south and help bring the Northern Powerhouse to life. We expect to continue to deliver similar results for our upcoming franchise competitions. Private sector competition is good for passengers, local communities and taxpayers. That is why as part of our latest schedule we have started the competition for new franchises for the InterCity West Coast, East Anglia, South Western, East Midlands and West Midlands. I am confident that, through these franchises we will deliver the rail network this country needs. I am placing a copy of the franchising schedule in the libraries of the House. 26 May 2016 | Written statements | House of Commons | HCWS34 Member: Mr Patrick McLoughlin Department: Department for Transport Attachment: Franchising Schedule

About the Library The House of Commons Library research service provides MPs and their staff with the impartial briefing and evidence base they need to do their work in scrutinising Government, proposing legislation, and supporting constituents. As well as providing MPs with a confidential service we publish open briefing papers, which are available on the Parliament website. Every effort is made to ensure that the information contained in these publically available research briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes. If you have any comments on our briefings please email [email protected]. Authors are available to discuss the content of this briefing only with Members and their staff. If you have any general questions about the work of the House of Commons you can email [email protected]. Disclaimer This information is provided to Members of Parliament in support of their parliamentary duties. It is a general briefing only and should not be relied on as a substitute for specific advice. The House of Commons or the author(s) shall not be liable for any errors or omissions, or for any loss or damage of any kind arising from its use, and may remove, vary or amend any information at any time without prior notice. The House of Commons accepts no responsibility for any references or links to, DEBATE PACK or the content of, information maintained by third parties. This information is Number CDP-0119 provided subject to the conditions of the Open Parliament Licence. 9 June 2016