The First ScotRail passenger rail franchise
Prepared for the Auditor General for Scotland November 2008 Auditor General for Acknowledgements: Audit Scotland prepared this report Scotland for the Auditor General for Scotland. We have had the generous support of The Auditor General for Scotland is the Parliament’s watchdog for ensuring the Scottish Government and propriety and value for money in the spending of public funds. Transport Scotland. In addition we would like to thank those who He is responsible for investigating whether public spending bodies achieve participated in the interviews for the the best possible value for money and adhere to the highest standards of study and the following organisations financial management. for providing data: First ScotRail, Passenger Focus, Strathclyde He is independent and not subject to the control of any member of the Scottish Partnership for Transport and the Government or the Parliament. Office of Rail Regulation.
The Auditor General is responsible for securing the audit of the Scottish We would also like to thank the project Government and most other public sector bodies except local authorities and fire advisory group (Appendix 2), which and police boards. comprised a range of experienced individuals from the rail sector, for The following bodies fall within the remit of the Auditor General: providing valuable advice and a sounding board for the project team • directorates of the Scottish Government throughout the study. • government agencies, eg the Prison Service, Historic Scotland • NHS bodies • further education colleges • Scottish Water • NDPBs and others, eg Scottish Enterprise.
Note: Prior to September 2007, the Scottish Administration was generally referred to as the Scottish Executive. It is now called the Scottish Government. When dealing with the earlier period, this report refers to the Scottish Executive. Recommendations for the future refer to the Scottish Government.
Audit Scotland is a statutory body set up in April 2000 under the Public Finance and Accountability (Scotland) Act 2000. It provides services to the Auditor General for Scotland and the Accounts Commission. Together they ensure that the Scottish Government and public sector bodies in Scotland are held to account for the proper, efficient and effective use of public funds. The First ScotRail passenger rail franchise Contents
Introduction Recommendations First ScotRail has received a number Page 2 Page 16 of awards
Setting the scene Part 2. The franchise extension Recommendation Page 3 Page 17 Page 29
About the study Key messages Appendix 1. Fares structure for First ScotRail passenger services Summary of key messages Key aspects of the original franchise Page 30 contract were no longer fit for purpose Recommendations Appendix 2. Membership of the Page 8 Transport Scotland’s appraisal process project advisory group was rigorous and has resulted in a Page 31 Part 1. Management of the guaranteed £73.1 million investment franchise by First ScotRail Appendix 3. Service QUality Page 10 Page 18 Incentive REgime (SQUIRE) performance areas Key messages Governance arrangements for the Page 32 review process could have been First ScotRail has received £864 million better managed in public funding from the start of the Page 21 franchise contract to March 2008 Page 11 Recommendations Page 22 Transport Scotland’s management arrangements are generally effective Part 3. First ScotRail’s performance Page 12 Page 23
Transport Scotland could improve Key messages some aspects of its management of the franchise First ScotRail’s train running and service Page 13 quality performance has improved Page 24 Current performance measures are generally effective but could benefit Passenger satisfaction has increased from review Page 26 Page 14 Safety performance has improved Stakeholders cannot access information about the contract and Passenger growth has exceeded franchise performance from a single targets source Page 27
There may be some risks to the Most capital improvements have success of the franchise been completed ahead of schedule Page 15 First ScotRail’s good working relationships with key rail sector bodies has also contributed to improved performance Page 28 Introduction
First ScotRail provides most passenger rail services in Scotland through a franchise contract with Scottish ministers, and will receive £2.5 billion in government subsidy during the contract term. Introduction
Setting the scene Exhibit 1 1. Rail transport is a vital service First ScotRail 2007/08 operating statistics for Scotland, providing access to employment, education, services and Statistic British context leisure activities. Most passenger rail Provided 81 million passenger 6.6% of Britain’s passenger journeys services in Scotland are provided through journeys a franchise contract between Scottish ministers and the private train operating Passengers travelled 2.5 5.1% of Britain’s passenger kilometres company First ScotRail Limited. The First billion kilometres ScotRail franchise covers more than 95 per cent of Scotland’s passenger train An average of 31 kilometres An average of 40 kilometres travelled services and the long distance sleeper travelled per journey per journey service between Scotland and London. Covers 3,032 route kilometres Highest of all British franchises First ScotRail operating statistics for 2 2007/08 are set out in Exhibit 1. Manages 341 stations Second only to Northern Rail’s 471 stations
2. The franchise is in its second term Notes: following privatisation of passenger 1. Twenty franchised and six non-franchised train operating companies provide passenger services in 1 Britain. The data in this exhibit do not include the non-franchised train operating companies. rail services in Britain in 1993. The 2. Northern Rail provides train services in the north of England. Northern Rail covers 2,696 route franchise was operated by National kilometres, the second highest after First ScotRail. Source: National Rail Trends 2007-2008 yearbook, Office of Rail Regulation Express from 1997 to 2004. Following a tendering process, the Strategic Rail Authority (SRA) and the then to the Scottish Government, a 6. The Office of Rail Regulation Strathclyde Passenger Transport number of rail functions for Britain are (ORR) is responsible for setting Executive (SPTE), in consultation with reserved to Westminster, for example, and monitoring targets for Network the then Scotish Executive, awarded health and safety and Disability Rail, including setting station access the franchise to First ScotRail Limited, Discrimination Act compliance. The charges and track access agreements. a subsidiary of FirstGroup, in August 2, 3 relevant British bodies consult with ORR is also responsible for ensuring 2004. First ScotRail began operating Transport Scotland on reserved that Network Rail, train operating the franchise in October 2004. matters where they affect Scottish companies (including First ScotRail), railways. Exhibit 2 (overleaf) illustrates and rolling stock companies comply 3. In November 2005, the Scottish the structure of passenger rail service with rail specific health and safety Executive took over responsibility provision in Scotland. regulations and that First ScotRail from the SRA and SPTE for letting, and Network Rail comply with their subsidising and managing the 5. Network Rail owns and operates operating licences. The Department franchise and monitoring First most of Britain’s rail infrastructure for Transport oversees Britain’s ScotRail’s performance. These (tracks, signals, bridges, tunnels compliance with European Union rail responsibilities were transferred and stations), and receives funding strategies and safety standards and to the Scottish Executive agency from the Scottish Government to the Disability Discrimination Act 1995. Transport Scotland when it was maintain and improve Scotland’s The British Transport Police (BTP) established in January 2006. rail infrastructure.4 First ScotRail is the national police force for the leases the stations it manages from railways, with its services in Scotland Responsibilities for rail services in Network Rail, its trains from rolling largely funded by First ScotRail and Scotland are complex stock companies, and secures the Network Rail. 4. Although most of the funding, use of tracks through a track access strategic planning and management agreement with Network Rail.5 of Scotland’s rail industry is devolved
1 The rail network and passenger services in Northern Ireland remain state owned. 2 The Transport (Scotland) Act 2005 dissolved the Strathclyde Passenger Transport Executive (SPTE), transferring its rail functions to Scottish ministers and remaining transport functions to the Strathclyde Partnership for Transport (SPT), established by the Act. 3 Prior to September 2007, the Scottish Administration was referred to as the Scottish Executive. It is now called the Scottish Government. When dealing with the earlier period this report refers to the Scottish Executive but in all other instances it refers to the Scottish Government. 4 In 2007/08, Transport Scotland provided £365 million in capital and resource grants to Network Rail for the operation, maintenance and renewal of the rail infrastructure network. 5 First ScotRail manages most stations in Scotland except for: Edinburgh Waverley and Glasgow Central stations, which are managed by Network Rail; Dunbar station, managed by the National Express East Coast franchise; and Glasgow Prestwick station, which is privately managed by Glasgow Prestwick Airport Limited.
Exhibit 2 Passenger rail service structure in Scotland
KEY: Scottish Private company Consultation ministers Government body Independent statutory body Accountable to Parliament Mobility andand and the public through Scotland only Access CommitteeCom Scottish ministers I Britain for Scotland
Transport Consultation G Scotland Department G for Transport
Subsidises and Funding for Consultation manages the rail maintaining and Passenger franchise. Monitors developing I Focus performance and the rail measures rail service infrastructure in quality Scotland Consultation, measures passenger satisfaction and provides Monitors passenger advocacy compliance and advice services First with Disability P Discrimination ScotRailScotRa Act Operateses passpassengere rail servicesces and statistations in Station leases, Regional Scotland under the track and Consultation government subsidised I Transportnspor franchise agreement station access Network Partnerships agreements P and related Rail payments
Provides policing services for the railway Grants operating Grants operating Fares license, monitors license, sets Passengers health and regulatory targets, safety and and monitors access compliance with British agreement fees, operating licence health and safety, and G Transport compliance with Police operating licence Train lease agreements Rolling stock P companies Monitors health and safety compliance G Office of Rail Regulation
Note: Transport Scotland and First ScotRail also consult or work with wider public transport passenger representative groups such as Passengers’ Views Scotland, and other train operating and rail freight companies. Although First ScotRail provides more than 95 per cent of Scotland’s internal passenger services, Cross Country Trains, First TransPennine Express, National Express East Coast and Virgin Trains also provide passenger services in Scotland. Source: Audit Scotland Introduction
7. Transport Scotland and First ScotRail 10. Network Rail published its extended the franchise to November consult with Passenger Focus and the first Route Utilisation Strategy for 2014. First ScotRail will receive Mobility and Access Committee for Scotland in March 2007, developed £2.5 billion in government subsidy Scotland (MACS) on rail passenger- in consultation with Transport over the ten-year franchise term, related matters in Scotland.6 First ScotRail Scotland and First ScotRail.10 The which includes subsidies to ensure passengers’ satisfaction is assessed as strategy considers future changes in First ScotRail provides vital but non- part of Passenger Focus’s national rail demand, assesses existing services, commercially viable rail services.13 In passenger surveys. First ScotRail also and identifies a range of initiatives 2007/08, First ScotRail received an consults with the statutory Regional aimed to make more effective use average of 11 pence per passenger Transport Partnerships (RTPs) regarding of Scotland’s railways. The initiatives kilometre in government subsidy. regional timetables, performance and include increasing capacity between Remaining operating costs are met regional transport priorities.7 Fife and Edinburgh, reducing journey through passenger fares and other times between the central belt revenue generated by First ScotRail. Transport Scotland is responsible for and northern cities, and improving managing the First ScotRail contract connectivity between Edinburgh and 13. The franchise contract sets out and developing the long-term priorities Glasgow. both Scottish ministers’ and First for Scotland’s railways ScotRail’s obligations.14 Transport 8. The Railways Act 2005 established 11. In July 2007, Transport Scotland Scotland, on behalf of Scottish the current regulatory structure for published the High Level Output ministers, is required to manage rail in Britain, devolving most of Specification (HLOS), setting out the franchise contract, monitor First the funding, strategic planning and Scottish ministers’ priorities for the ScotRail’s performance, and ensure all management of Scotland’s rail industry rail industry from 2009 to 2014.11 other Scottish ministers’ obligations to the Scottish Executive in April 2005. The HLOS aims for First ScotRail to under the contract are fulfilled. First Along with the Transport (Scotland) achieve an average of 92 per cent of ScotRail is to pursue agreed revenue Act 2005, the Railways Act 2005 services arriving on time by the end of targets and is required to deliver a replaced the Strategic Rail Authority 2014, and details a number of major number of service obligations under and Strathclyde Passenger Transport and small-scale rail infrastructure the franchise, namely: Executive with Scottish ministers as projects to improve reliability, reduce parties to the franchise contract. journey times and increase capacity.12 • Operate train services specified in The projects include the Glasgow the franchise contract. 9. The Railways Act 2005 also Airport Rail Link (GARL); re-opening enabled Scottish ministers to develop the Airdrie to Bathgate and Edinburgh • Meet reliability, punctuality and their long-term strategy for rail in to Tweedbank (Borders) passenger rail capacity targets that become more Scotland, with Transport Scotland lines; lengthening station platforms challenging over time. leading this work. Scotland’s Railways on specified routes to allow longer was published in December 2006, trains and increased capacity; and • Meet the Service QUality Incentive detailing Scottish ministers’ 20-year infrastructure improvements to REgime (SQUIRE) train and station vision for rail in Scotland.8 Scotland’s improve journey times. quality benchmarks, including Railways shares the strategic aims cleanliness, security, accessibility, of Scotland’s National Transport First ScotRail will receive £2.5 billion comfort, and provision of travel Strategy to improve journey times in government subsidy over the ten- information. and connections, reduce emissions, year franchise term and improve the quality, accessibility 12. The First ScotRail franchise was • Deliver a capital programme of and affordability of public transport established in 2004 as a seven-year station, passenger information, in Scotland.9 term with the option to extend the safety, security and train stock term by a further three years. improvements. In April 2008, Scottish ministers
6 Passenger Focus is Britain’s independent rail consumer watchdog, established under the Railways Act 2005, replacing the regional Rail Passengers’ Committees. MACS is a statutory advisory body established in 2002 to advise the Scottish Executive on disability issues regarding transport. 7 The seven Regional Transport Partnerships were established by the Transport (Scotland) Act 2005 to allow local authorities and other regional representatives to plan and develop the transport strategy for their regions. 8 Scotland’s Railways, Scottish Executive, December 2006. 9 Scotland’s National Transport Strategy, Scottish Executive, December 2006. 10 Scotland Route Utilisation Strategy, Network Rail, March 2007. 11 High Level Output Specification, Transport Scotland, July 2007. 12 The ‘Public Performance Measure’ (PPM) will be used to determine whether 92 per cent of First ScotRail services arrive on time. The PPM is the main method used in Britain to assess passenger train punctuality. For regional operators, including First ScotRail, ‘on time’ is defined as arriving within five minutes of the timetabled arrival time. A train service’s punctuality depends on the performance of both the infrastructure (Network Rail) and the service provider (First ScotRail). 13 The £2.5 billion subsidy is in 2004/05 prices. Subsidy payments to First ScotRail are made annually, with its 2004/05 price inflated by the retail prices index (RPI) each year. The total inflation adjustment from the start of the franchise, October 2004, to the end of March 2008 was £36.5 million. 14 The contract is available on Transport Scotland’s website www.transportscotland.gov.uk
• Deliver specified service in April 2008 (Part 3 of this report • Additionally, a profit cap has been improvements, such as introducing describes the review process).15 The introduced to guard against First new services, when requested extension introduced the following ScotRail achieving unexpected by Scottish ministers. Scottish main changes: profit levels.16 Half of any profit ministers can choose to purchase (revenue minus costs) exceeding any service improvements, • Punctuality and capacity £27.3 million in any year, and half including improvements for which compliance targets have been of any profit achieved from the Transport Scotland has already made more challenging from additional service improvement agreed prices with First ScotRail 2008/09 onwards. Permitted options, is to be paid to Scottish (priced options). delays caused by First ScotRail ministers, or invested into further and the percentage of services service improvements.17 Scottish ministers introduced a permitted to provide less than the number of changes to the contract in planned capacity have both been • In exchange for the extension and the franchise extension agreement reduced by more than a third, the change in the revenue share 14. During the first year of the bringing the targets more in line arrangements, Transport Scotland contract (2004/05), First ScotRail with recent performance. has secured a guaranteed reached a point at which 80 per £73.1 million investment from cent of any additional revenue • Revenue targets have been First ScotRail.18 Scottish ministers for the year was returned to the revised from the start of 2007/08, will determine how to use Scottish Executive (a condition of in line with more recent forecasts, this investment. For example, the original contract, Exhibit 3). First increasing the target by 7.5 per ministers could decide to reduce ScotRail’s revenue has not reached cent between April 2007 and the government subsidy or invest this level again, however, in 2006/07 November 2014. in service improvements that will it would have required only 0.4 per address the priorities set out in cent additional revenue to do so. • The revenue share and support Scotland’s Railways. Additionally, by the end of 2005/06, arrangements have been changed First ScotRail’s performance was (Exhibit 3). The combination of the • First ScotRail is required to provide outstripping its punctuality and revised, higher revenue targets additional information to better capacity targets. and the change in the revenue inform planning for the next share arrangement means that, franchise or to inform alternative 15. Transport Scotland’s forecasts providing it achieves, each year, options. indicated that First ScotRail would revenue of more than ten per cent continue to return 80 per cent of above the revised revenue targets, • First ScotRail is required to additional revenue for the remainder First ScotRail could retain up to participate in the development of of the franchise. Transport Scotland £236.7 million in additional revenue new major rail projects that will was concerned that this would reduce over the remaining franchise term begin services after the franchise the incentive for growing services, without paying a share to Scottish term. since First ScotRail’s costs to improve ministers. However, this would services might exceed its 20 per cent require First ScotRail to achieve The franchise contract reflects but share of the revenue achieved. This significant further improvement, does not determine the structure for would be contrary to the Scottish a situation Transport Scotland passenger fares Government’s strategic aims as set considers unlikely. 17. Fares for First ScotRail services out in Scotland’s Railways, the Route are a mix of controlled fares (where Utilisation Strategy and High Level Scottish ministers determine the fare Output Specification. prices for the greater Strathclyde area), regulated fares (where price 16. Transport Scotland reviewed increases are restricted by Scottish options to address these concerns, ministers) and unregulated fares and the three-year extension to the (with price increases determined by franchise contract was announced First ScotRail).19 Appendix 1 provides
15 The franchise extension agreement is available on Transport Scotland’s website www.transportscotland.gov.uk 16 First ScotRail is required to provide Transport Scotland with its profit and loss account statement every four weeks, and have its annual accounts audited by an independent auditor approved by Transport Scotland. 17 All figures in this paragraph are at 2004/05 prices, except the £27.3 million profit cap, which is at 2007/08 prices, and will be inflated by the retail prices index (RPI) each year. 18 This is in addition to the £40 million First ScotRail is required to spend on a range of capital improvements during the first seven years of the contract. 19 Fares classed as controlled and regulated were determined by the fares policies of the SRA and SPTE (for which Scottish ministers are now responsible) or the British-wide Ticketing and Settlement Agreement (TSA). Introduction
Exhibit 3 The extension has changed the levels at which revenue share and support arrangements apply
Original franchise contract revenue support and return arrangements Target revenue
94% 98% 102% 106%
Scottish ministers provide First ScotRail returns a share of revenue support to First ScotRail revenue to Scottish ministers (from Oct 2007 onwards)
Franchise extension revised revenue support and return arrangements
Target revenue
86% 90% 110% 114%
Scottish ministers provide First ScotRail returns a share of revenue support to First ScotRail revenue to Scottish ministers
No support/return 50% support/return 80% support/return
The contract includes a revenue share and support arrangement. When First ScotRail’s revenue exceeds an agreed target level, it is required to return a share of the additional revenue to the Scottish Government. Conversely, if after three years of operating, First ScotRail was unable to meet the agreed target revenue then Scottish ministers would provide financial support.
As part of the extension, the point at which First ScotRail must return a share of its revenue to the Scottish Government has been extended from two per cent to ten per cent above annual revenue target levels. In exchange for the extension, Transport Scotland has secured a guaranteed investment of £73.1 million from First ScotRail.
Applied retrospectively from 2007/08, First ScotRail is to return 50 per cent of all revenue between ten and 14 per cent above target and 80 per cent of all revenue achieved above 114 per cent of the target.
In the original franchise contract, Scottish ministers were to pay revenue support to First ScotRail from October 2007 onwards, should revenue have fallen to 98 per cent or less of the target revenue. This has also been revised to 90 per cent or less of the target revenue in order to hold constant the value of any potential revenue support liability.
Source: Audit Scotland
further details on the structure of First • analysis of the costs of the • First ScotRail’s train running ScotRail fares. franchise, including subsidy levels, and quality of service performance payments and performance is good and 18. The Britain-wide Ticketing and management costs improving in most areas. Settlement Agreement (TSA) covers fares on routes served by more than • analysis of First ScotRail Recommendations one train operating company and is performance data, including administered by the Association of comparisons with other British To improve the management of the Train Operating Companies (ATOC) passenger rail franchises franchise Transport Scotland should: and approved by the Office of Rail Regulation (ORR). Following the • interviews with Transport Scotland • review performance measures devolution of rail responsibilities, officials, First ScotRail staff, to improve alignment Scottish ministers became responsible other rail and transport bodies, with passenger and wider for the fares policy for routes covered rail transport academics, and government priorities only by First ScotRail. The Scottish passenger representative groups. ministers’ fares policy is administered • consider allocating and by Transport Scotland but outside of 21. A project advisory group provided monitoring a budget for franchise the management of the First ScotRail the study team with independent performance payments franchise contract. Transport Scotland advice and feedback at key stages of is currently developing a new fares the project. The membership of the • clarify whether all other funding policy to encourage a shift to rail group is shown in Appendix 2. commitments relating to the transport, with the intention that the franchise are secured until the fares structure be easily understood by Summary of key messages end of the extended franchise passengers and, where possible, be term in November 2014. Where competitive with other transport modes. • First ScotRail will receive funding has not been secured, £2.5 billion in government Transport Scotland should clarify About the study subsidy for the franchise over the arrangements its ten-year term. 19. This report provides an • clarify its consultation assessment of Transport Scotland’s • Transport Scotland is generally arrangements, both for management of the franchise managing the franchise passenger rail and its overall contract, including the awarding of the contract effectively, but there transport responsibilities, three-year extension in April 2008, and is some scope to improve its to improve stakeholder First ScotRail’s performance against consultation with stakeholders, engagement. the franchise terms. We did not budgeting for performance examine the initial development and payments, and the alignment To improve stakeholder awarding of the franchise contract as between performance understanding and transparency this occurred prior to the devolution measures and passenger and regarding the franchise, Transport of rail responsibilities to the Scottish wider government priorities. Scotland should: Government. The report is organised into three sections: • Transport Scotland makes • establish a single source from only limited information about which stakeholders can easily • Management of the franchise the contract and associated access the information they (Part 1). performance readily accessible consider relevant regarding to stakeholders and the the franchise • The franchise extension (Part 2). wider public. • ensure a guide to the franchise • First ScotRail’s performance (Part 3). • By extending the franchise contract is developed that Transport Scotland has secured identifies key elements for 20. This report draws on various a guaranteed £73.1 million passengers and taxpayers, is sources of information, including: that will be used to reduce reviewed for its readability and the government subsidy or made publicly available • a review of relevant documents, be invested in rail services. including the franchise contract, However, governance the extension agreement, arrangements for the review meeting minutes and franchise that led to the extension could management reports have been better managed. Introduction
• publish a summary of the performance meeting minutes identifying key elements for passengers and taxpayers.
When developing the specifications for the next franchise contract, Transport Scotland should:
• develop a systematic project plan for awarding the next franchise. This should identify the key stages and their timeframes, consultation strategy, decision-making criteria, and reporting and approval arrangements
• specify under what conditions an extension will be considered or the criteria that will be used to decide whether an extension is appropriate, should the next franchise agreement include an extension option
• consider any relevant recommendations from the recent National Audit Office report on letting rail franchises.20
The Scottish Government may also wish to consider:
• introducing an obligation for all public transport providers to consult with other affected transport providers when proposing service or timetable changes, to assist further integrated transport improvements
• introducing versions of the Service QUality Incentive REgime (SQUIRE) for other transport and service providers.
20 The Department for Transport: Letting Rail Franchises 2005-2007, National Audit Office, October 2008.
10 Part 1. Management of the franchise
Transport Scotland manages the core aspects of the franchise contract well, but there is some scope to improve. Part 1. Management of the franchise 11
Key messages Exhibit 4 Payments to First ScotRail 2004/05 to 2007/08 • First ScotRail has received 300 £864 million in public funding Miscellaneous from the start of the franchise 250 payments contract to March 2008, Revenue return £296 million of which was 200 in 2007/08. 150 Performance payments/ 100 penalties • Overall, Transport Scotland’s Specified service Costs (£ million) (£ Costs 50 management arrangements improvements are effective, but there is some 0 scope to improve. Subsidy -50 2004/05 2005/06 2006/07 2007/08 • Performance measures Year are effective, but could be reviewed to improve alignment Notes: 1. All figures are in cash terms. with passenger and wider 2. The 2004/05 figures are for half a year given First ScotRail began operating in October 2004. government priorities. Source: Transport Scotland
• There is no single source of information about the contract and pays or penalises First ScotRail cleanliness, security, accessibility, and franchise performance. accordingly.23 To date, First ScotRail comfort, and provision of travel has received £22.7 million in information (see Appendix 3 for a list First ScotRail has received performance payments, made up of of the performance areas).24 Transport £864 million in public funding £27.4 million in payments for train Scotland can pay financial incentives from the start of the franchise running performance minus or impose penalties for each of the contract to March 2008 £4.7 million of penalties for service 38 performance areas. The balance quality performance. of penalties and rewards for service 22. To date, First ScotRail has received quality has resulted in £4.7 million being a total of £864 million in public funding 24. Train running performance collected from First ScotRail to date, in cash terms (including £296 million in consists of punctuality, providing the consisting of £2.6 million for the quality 2007/08).21 Most of this (96 per cent) planned seated passenger capacity of service at stations and £2.1 million for has been the subsidy for providing and minimising changes to the quality of service on trains. However, rail passenger services (Exhibit 4). timetables. The £27.4 million paid SQUIRE penalty payments overall have The amount of subsidy per year was to First ScotRail to date for its train reduced over time. determined prior to the start of the running performance comprises franchise. The subsidy increased by more £29.8 million for punctuality 26. To date, First ScotRail has received than a third from 2005/06 to 2006/07, performance, minus penalties of £23.9 million for its delivery of specified with little expected variation in the annual £2.3 million for not providing the service improvements requested by subsidy levels between 2006/07 and the planned capacity and £96,800 for Scottish ministers. Under the revenue end of the franchise term.22 changes made to its timetables. share arrangements, First ScotRail has so far paid £4.5 million of revenue to 23. The contract includes a system 25. Transport Scotland assesses the government bodies in Scotland (the of financial rewards and penalties to quality of First ScotRail’s services government).25 To date, First ScotRail encourage First ScotRail to maintain at stations and on trains through has also paid the government £10.5 and improve performance. Transport the Service QUality Incentive million in miscellaneous payments. Scotland monitors train running REgime (SQUIRE), which covers Miscellaneous payments between the and quality of service performance 38 performance areas, such as government and First ScotRail include
21 Funding was initially provided by the Scottish Executive via the Strategic Rail Authority and by the Strathclyde Passenger Transport Executive. Since November 2005, following the devolution of rail responsibilities to Scotland, the funding has been provided directly by the Scottish Executive/Scottish Government. 22 The increase between 2005/06 and 2006/07 was as a result of a Britain-wide review by the ORR rebalancing the government grants to Network Rail with the track access charges the franchise operators pay Network Rail. This resulted in First ScotRail’s track access charges increasing substantially from 2006/07 onwards, which had to be accommodated in the Scottish Government’s subsidy payments to First ScotRail. 23 Given First ScotRail can both receive payments and incur penalties, the figures provided in this section are net, that is, payments minus penalties. 24 SQUIRE was originally developed by the Strathclyde Passenger Transport Executive. 25 Each year’s annual revenue return is paid the following year. Therefore the £4.5 million revenue return up to the end of 2007/08 covers the period up to the end of 2006/07. 12
payments to First ScotRail for additional in establishing the original contract, specified service improvements; its passenger services and First ScotRail monitoring First ScotRail’s operations and service delivery obligations; levels refunds to the government if the final managing its contractual compliance. of service use; safety performance; price it pays for a sub-contract is less financial performance; efforts to than what the government had initially 28. Transport Scotland monitors First reduce fare evasion; commercial provided for the sub-contract. ScotRail’s train running and service and marketing activities; human quality performance on a daily basis. resources issues; and compliance Transport Scotland’s management Automated monitoring systems with the franchise contract obligations. arrangements are generally effective operated by Network Rail record First Transport Scotland also reviews ScotRail’s train running performance at National Passenger Survey data 27. The franchise contract specifies various points on the rail network. Both and draws upon data from other rail First ScotRail’s performance and Transport Scotland and First ScotRail bodies, such as Network Rail and the compliance requirements, the receive this information. This allows Office of Rail Regulation, to assess consequences for not meeting these Transport Scotland to assess whether First ScotRail’s performance. This requirements and the steps to be First ScotRail addresses performance includes comparisons with other taken to rectify any non-compliance. issues and to calculate the British franchises. Transport Scotland has a dedicated performance-based financial payments rail franchise management team or penalties. Transport Scotland’s 30. The franchise contract requires within its rail delivery directorate SQUIRE inspectors visit stations and Transport Scotland and First ScotRail (Exhibit 5). This team reviews and board trains daily (unannounced to First franchise managers to meet every acts on performance information ScotRail) to assess service quality. Each four weeks to discuss performance and forecasts, and plans for future station that First ScotRail manages and compliance issues. However, performance to ensure that First and a representative sample of trains the contract allows for additional ScotRail meets its contractual are inspected at least once every four performance meetings, and Transport requirements. More than half of the weeks. Transport Scotland reviews Scotland and First ScotRail have rail franchise management team the inspection results each day, established a number of additional were previously with the Strathclyde enabling it to quickly identify and meetings. Transport Scotland and Passenger Transport Executive, address poor performance. First ScotRail’s senior management bringing operational knowledge and meet quarterly to address any high- experience to Transport Scotland. 29. Transport Scotland also monitors level performance issues. Transport This experience included involvement First ScotRail’s progress with: the Scotland and First ScotRail have capital investments programme and also introduced meetings to address
Exhibit 5 Transport Scotland rail franchise management team structure
Head of rail franchise management
Franchise contract manager SQUIRE operations manager
Rail passenger Franchise commercial Franchise projects & Business manager 2 x Research interests manager performance manager investment manager officers
Railway policy officer 2 x Franchise services planning 12 x Inspectors & compliance managers
Administration officer
Note: The rail performance, rail finance and technical support teams within Transport Scotland’s rail delivery directorate and a Security and Policy manager seconded from the British Transport Police support the rail franchise management team with its day-to-day business. Source: Transport Scotland Part 1. Management of the franchise 13
particular aspects of the contract in Exhibit 6 further detail (eg, four-weekly service Rail franchise performance meetings per year quality, financial compliance, and fares and marketing meetings; bi-monthly transport integration and train planning Meeting Frequency Meetings per year meetings; and quarterly human Franchise performance Quarterly 4 resources compliance and revenue (senior management) protection meetings). Transport Scotland also meets bi-monthly with Franchise performance Four-weekly 13 Network Rail and First ScotRail to Service quality Four-weekly 13 discuss rail services and infrastructure performance issues. Financial compliance Four-weekly 13
31. The performance meetings are Fares and marketing Four-weekly 13 intended to drive improvement, with Transport integration Bi-monthly 6 a focus on resolving performance issues and forward planning (for Train planning Bi-monthly 6 example, the planning for major Human resources compliance Quarterly 4 events and updates on ministerial priorities and associated implications). Revenue protection Quarterly 4 Actions are allocated and reported Rail services and back to the next meeting. Examples Bi-monthly 6 of Transport Scotland’s management infrastructure performance actions from meeting minutes Total 82 include: instructing First ScotRail to deliver its outstanding remedial Source: Transport Scotland action plans; instructing First ScotRail to improve the quality of the train toilets, following an increase in failed inspections, with a subsequent Transport Scotland could improve 35. Although performance payments improvement acknowledged in a later some aspects of its management have accounted for only 2.6 per cent meeting; and requiring First ScotRail of the franchise of the payments to First ScotRail to implement an improvement to date, the values involved are strategy to address an increase in the 33. Transport Scotland manages the considerable and have increased over number of cancelled services. core aspects of the franchise contract time (Exhibit 7, overleaf). Transport effectively. However, it could improve Scotland does not currently allocate 32. The full range of performance in some areas. a budget for performance payments, meetings equate to 82 meetings and in 2007/08 Transport Scotland’s per year (Exhibit 6) and daily 34. Regional Transport Partnerships, actual spending was significantly performance monitoring accounts for passenger representative groups and different from its forecasts: the majority of Transport Scotland’s other transport stakeholders reported overall franchise management costs. that, while Transport Scotland consults • £14 million punctuality payment Transport Scotland believes that the well on specific projects, it has not was 26 per cent more than detailed specification in the franchise clarified its consultation arrangements, forecast. contract and the high level of scrutiny both for passenger rail and its overall minimises risks to the taxpayers’ transport responsibilities. However, • £0.5 million penalty for not subsidy of the franchise. Transport Transport Scotland considers that providing the planned capacity was Scotland reports its overall franchise it consults with stakeholders as 38 per cent less than forecast. management costs were £1.4 million appropriate. Transport Scotland in 2007/08, equivalent to 0.5 per cent confirmed that it consults on specific • £78,000 penalty for changes made of the £274 million subsidy paid to priorities and projects rather than on an to timetables was nearly seven First ScotRail in that year. ongoing basis, choosing instead to place times more than forecast.26 reliance on the Scottish Government’s Transport Directorate’s consultations. • £344,000 quality of service penalty was 74 per cent less than forecast.
26 Transport Scotland reports that the larger than anticipated penalty for changes made to timetables was due to a train drivers’ dispute which resulted in many timetable changes. 14
Exhibit 7 39. The overall suite of performance Performance based payments and penalties to First ScotRail measures may benefit from review 2004/05 to 2007/08 to improve its coverage, including consideration of other service 15 Punctuality performance areas, and alignment with passenger and wider government 12 Capacity priorities. For example, in some areas, the SQUIRE regime is not aligned with 9 Timetable passengers’ priorities. Toilet facilities changes and providing information during 6 Station quality delays, for instance, are currently 3 areas of low passenger satisfaction. Train quality However, under the current regime,
Payment/penalty (£ millions) (£ Payment/penalty 0 toilet facilities incur lower performance Other service quality payments or penalties than the majority -3 of the performance areas. Although 2004/05 2005/06 2006/07 2007/08 SQUIRE assesses whether passenger Year announcement systems work, it does Notes: 1. All figures are in cash terms. not assess the appropriateness of the 2. The 2004/05 figures are for half a year given First ScotRail began operating in October 2004. information provided. Source: Transport Scotland 40. The costs involved in rectifying Current performance measures are circumstances where missing the some SQUIRE performance areas could generally effective but could benefit connecting train has consequences limit the opportunities to rectify other from review for passengers, given one of the performance areas which are likely to Scottish Government’s priorities is to be of greater importance to passengers. 36. Transport Scotland uses industry- improve integrated transport. For example, as part of the SQUIRE wide approved performance regime First ScotRail is required to measures to assess the running of 38. First ScotRail receives payments remove graffiti, and this is the station train services (ie, punctuality, capacity for each of the SQUIRE performance performance area with most financial and timetable changes), and has areas if its percentage of passed incentives. The SQUIRE definition for used the contract extension to make inspections for that performance graffiti includes marking or scratching. the punctuality and capacity targets area exceeds the benchmark. It also First ScotRail reports it spends £230,000 more challenging. Both Transport incurs penalties when this falls below a year on replacing station glazing that Scotland and First ScotRail report the benchmark, with many of the has minor blemishes, which is likely to that the financial incentive placed benchmarks requiring 90 per cent or be beyond passengers’ expectations, on train running performance has more of the inspections to pass (see and suggests that this money could been an important contributor to the Appendix 3 for the performance areas instead be spent on areas of greater improvements achieved to date. and benchmark levels). First ScotRail importance to passengers, such as incurs additional penalties if it does not improving toilets. 37. However, there may be some rectify failed inspections within required situations where financial incentives timeframes. All of the rail bodies we 41. The Scottish Government take precedence over passengers’ spoke to credited the regime with has a policy priority to reduce requirements. First ScotRail is not driving improvements in service emissions, and the extension to penalised for delays to its services quality and considered it good practice the franchise includes a number of due to weather disruptions, within the industry. The Department environmental improvement actions infrastructure issues or the for Transport has introduced similar in its list of service improvement performance of other train operating forms of the regime in recently let rail options. Transport Scotland does not companies (with Network Rail and the franchises, however, it does not pay currently assess any environmental responsible train operating company financial incentives or impose penalties outcomes of the franchise, such as instead penalised). However, it is for service quality performance. It is too energy consumption, emissions or penalised if it delays a service to early to say whether these schemes waste recycling efforts. However, accommodate a delayed connecting are as effective as the SQUIRE in June 2008, Scottish ministers bus or ferry service. Transport regime in promoting service quality requested First ScotRail to produce, Scotland may wish to review this for improvement. by April 2009, a report assessing the Part 1. Management of the franchise 15
possible energy efficiency and waste 45. Transport Scotland is required by There may be some risks to the minimisation techniques that could be the contract to publish the minutes of success of the franchise introduced and how performance in the franchise performance meetings. these areas could be assessed. Transport Scotland has interpreted 47. Listing potential risks to the this as a requirement to distribute success of the franchise does not 42. Additionally, Transport Scotland the minutes to attendees rather than imply that any of these risks are does not assess some aspects public disclosure, and has suggested likely to occur, but it is important that of performance. For example, this is partly because discussion can stakeholders recognise and plan for the franchise contract aims for all include issues that are commercially any risks that might apply to them. passengers to have a seat within ten sensitive. This interpretation is also While the extension may affect the minutes of boarding. Transport Scotland common across the Department relative importance of some of these and First ScotRail acknowledge that for Transport’s franchise contracts. risks, most have existed since the this aim cannot be achieved on some However, we believe this is unlikely original contract was put in place. services due to current infrastructure to be the interpretation held by other Transport Scotland currently monitors limitations (for example, longer trains stakeholders. Publishing a summary these risks and it is important that it that provide greater capacity cannot of the various performance meetings continues to do so. stop at stations with short platforms). identifying those elements relevant However, routine and reliable to passengers and taxpayers would 48. There may be a risk to the assessment of overcrowding is not improve transparency about Transport viability of the franchise if there is a conducted to establish the extent of Scotland’s management of the sustained downturn in the economy. the problem. franchise. As economic growth is the strongest predictor of passenger demand, and 43. Transport Scotland monitors 46. Transport Scotland publishes therefore revenue levels, an economic First ScotRail’s progress with service information on some of the areas of downturn is likely to result in less improvements but could do more franchise performance that it assesses. revenue for First ScotRail, potentially to assess the intended outcomes of The website provides train and station putting the franchise and its services these improvements. For example, results for the SQUIRE regime, at risk. The franchise contract has whether improvements to station but does not include train running a number of conditions to address accessibility have resulted in increased performance information. Additionally, this risk: Transport Scotland regularly numbers, or greater satisfaction, of passenger representative groups were reviews First ScotRail’s budgets; the disabled passengers, and if initiatives generally unaware of the availability revenue support arrangements in the to encourage tourist or business of SQUIRE information, and some contract mean Scottish ministers can passengers have resulted in increases in Regional Transport Partnerships reported provide financial support to continue these passenger sub-groups. difficulties in securing regional SQUIRE services; and ultimately, Transport information from Transport Scotland. Scotland can become the ‘operator Stakeholders cannot access Transport Scotland acknowledges that of last resort’ and take over running information about the contract currently SQUIRE information cannot the franchise until it is re-let. Transport and franchise performance from a be easily aggregated to regional areas. Scotland can recover the costs single source Transport Scotland does not provide involved in becoming the ‘operator links to, and explanations of, First of last resort’ from the bond First 44. Transport Scotland’s website ScotRail performance information ScotRail was required to deposit to contains the franchise contract and published by First ScotRail and other cover such a situation. extension to the franchise. However, rail bodies, such as the Office of Rail the contract is highly technical and is Regulation’s National Rail Trends and 49. Scottish ministers’ obligation to not accompanied by a guide highlighting Passenger Focus’s National Passenger provide revenue support (if required) the important elements for passengers Survey data. is in place to reduce the risks of the and for taxpayers. Transport Scotland operator being unable to provide reports that it will place a ’plain English’ essential services.27 However, it does version of the contract on its website by pose a financial risk to taxpayers. April 2009, that will update the original The higher revenue targets set in the contract to reflect the amendments franchise extension may be harder for introduced by the extension, along with First ScotRail to achieve. This could a summary guide. have increased the risk of Scottish ministers needing to provide revenue support. However, the revenue
27 This requirement is common across British rail franchises. 16
support parameters were also re-set the extension if service quality To improve stakeholder in the franchise extension so that performance does not meet 98 per understanding, transparency, the value of the Scottish ministers’ cent of the performance achieved and accountability, Transport revenue support remains the same as in 2007/08. After October 2009 Scotland should: in the original contract. Transport Scotland can consider, as in the original contract, cancelling the • establish a single source from 50. To encourage further service contract if First ScotRail breaches which stakeholders can easily growth the franchise extension the service quality performance access the information they extended the point at which First requirements. consider relevant regarding ScotRail is required to provide a share the franchise; provide contact of its revenue to Scottish ministers. 53. First ScotRail may attempt to details for further information This has increased the possibility that increase revenue by increasing the requests; and include a guide First ScotRail may achieve greater prices for its unregulated fares, over to the franchise contract and profit levels than anticipated, while which Transport Scotland has little a summary of performance still receiving the set levels of control (see Appendix 1 for further meetings which identify key government subsidy. However, the details on the structure of First ScotRail elements for passengers franchise extension also introduced a fares). This situation also existed in the and taxpayers. profit cap (where 50 per cent of any original contract. However, passengers profit over £27.3 million in any year is can opt to buy an alternative, regulated The Scottish Government may also to be returned to Scottish ministers), ticket for the same route. Additionally, wish to consider: ensuring that the Scottish Government First ScotRail faces the risk that will receive a share of any high profits remaining passengers may instead • introducing versions of the that First ScotRail achieves.28 choose other transport options if fares service quality incentive regime were increased, as regulated tickets do (SQUIRE) for other transport 51. The franchise extension ends not offer the same flexibility in travelling and service providers. in November 2014, shortly after times as non-regulated fares. The fares the Glasgow Commonwealth policy is separate to the rail franchise, Games. There is a risk that First and is currently being reviewed. ScotRail resources may be focused on preparing FirstGroup’s bid for Recommendations the new franchise contract at a time when there will be greater To improve the management of the demand for its services. However, franchise Transport Scotland should: the franchise extension requires First ScotRail to co-operate in the • consider allocating and preparations and service provisions monitoring a budget for franchise for the Commonwealth Games, performance payments a requirement that was not in the original contract. Additionally, it could • improve stakeholder be seen not to be in FirstGroup’s engagement by clarifying its interests to allow First ScotRail’s consultation arrangements, performance to decline during the both for passenger rail and Commonwealth Games, should it transport needs overall. This wish to secure future franchises. should identify the parties to be consulted, the aspects they are 52. Given First ScotRail is now able to be consulted on, and the type to secure a significant increase in and timing of consultation revenue before returning a share to Scottish ministers, there is a risk that • review performance measures the penalty and reward arrangements to improve alignment for service quality performance may with passenger and wider become less of an incentive, resulting government priorities. in reduced service quality. However, the franchise extension agreement provides protection to October 2009, with Scottish ministers able to cancel
28 The £27.3 million profit cap is at 2007/08 prices and will be inflated by the retail prices index (RPI) each year. 17 Part 2. The franchise extension
Transport Scotland reviewed the contract using a rigorous appraisal process, and has secured £73.1 million of investment from First ScotRail. However, governance arrangements could have been better managed. 18
Key messages First ScotRail’s revenue has not Transport Scotland’s appraisal reached this level again, however, in process was rigorous and has • By April 2006, First ScotRail 2006/07 it would have required only resulted in a guaranteed was outstripping contractual 0.4 per cent additional revenue to £73.1 million investment by First performance requirements do so. Transport Scotland forecasts ScotRail and 80 per cent of additional also indicated that First ScotRail revenue achieved was being would return 80 per cent of additional 57. The precise date at which returned to the Scottish revenue for the remainder of the Transport Scotland decided to review Government. Transport Scotland franchise. the franchise contract is not clear. was concerned this could However, both Transport Scotland discourage further service 55. Transport Scotland was concerned and First ScotRail have indicated that growth and improvements. that the revenue return arrangement by Autumn 2006 they had begun would create a perverse incentive for discussing whether a change to the • To address these concerns, the First ScotRail not to deliver service existing contract was necessary. franchise extension increased improvements, because it would Exhibit 10 (page 20) provides a target revenue levels and cost First ScotRail more to introduce timeline of the options appraisal and extended the point at which the improvements than its share extension approval process. a proportion of revenue must of the associated revenue. There is be returned to the Scottish some evidence to support Transport 58. Transport Scotland established Government. The extension also Scotland’s concern (Exhibit 9). Transport a team to review the contract, set more challenging contractual Scotland acknowledges that it was which worked with other staff in the performance requirements. not possible to predict with certainty organisation to consider the options how First ScotRail would have available. The team also secured • Transport Scotland has secured behaved had the original revenue advice from expert consultants at an a £73.1 million investment share arrangements remained, but early stage. The options considered and other commitments from was of the view that undertaking an by Transport Scotland fell into three First ScotRail in exchange for early review would be in the public broad categories: the franchise extension. The interest. investment will be used either • To take no action, ie to run with to reduce the government 56. Transport Scotland was also the existing arrangements until subsidy or to fund service concerned that the situation could the expiry date and accept any improvements to address the lead First ScotRail to cut costs, associated risk. Scottish Government’s strategic resulting in reduced service quality aims for passenger rail transport. and passenger numbers. For example, • To negotiate changes to the contract when First ScotRail submitted its (retaining the seven-year term). • Transport Scotland used a 2006/07 business plan to Transport rigorous option appraisal process Scotland, it proposed a reduction in its • To negotiate further changes when considering the extension advertising spend. The revenue share in exchange for the three-year and its alternatives. However, arrangements appeared to be leading extension to the franchise (the governance arrangements First ScotRail to reduce costs, rather original contract contained an could have been better managed. than seek additional revenue, because option to extend the franchise, it would retain only 20 per cent of that but did not specify any criteria for Key aspects of the original revenue. Essentially, when spending considering an extension). franchise contract were no longer an additional £1, First ScotRail would fit for purpose need to secure a minimum of £5 in 59. Transport Scotland met with the revenue to break even (the remaining then Transport Minister in December 54. First ScotRail was performing £4 would be returned to Transport 2006 to discuss its concerns about above its punctuality and capacity Scotland). Transport Scotland was the franchise contract and to seek improvement targets within its first concerned that First ScotRail would approval to undertake further review year of operating (Exhibit 8) and it consider it easier simply to reduce work. The Minister agreed that had reached the point where it was costs by £1.29 Transport Scotland should undertake returning 80 per cent of additional further work on possible alterations to revenue to the Scottish Government. the franchise contract.
29 It is important to note that the options for reducing costs would be limited to those that did not involve a reduction in any of the services or obligations required by the franchise contract. However, because First ScotRail was performing above target levels in many areas, it would have been possible for it to reduce some aspects of service quality without breaching contract obligations. Part 2. The franchise extension 19
Exhibit 8 First ScotRail punctuality and capacity performance compared with targets
Punctuality – minutes of delay caused by First ScotRail Capacity – percentage of services providing planned capacity (moving annual average) (moving annual average)
60 100.0
50
40 99.5
30
20 99.0 percentage of services of percentage Minutes of delay (000s) delay of Minutes 10
0 98.5 6 6
05/0
20 2006/07 2007/08 2008/09 2005/0 2006/07 2007/08 2008/09
Actual performance Target performance
Note: The moving annual average is the average of the current and preceding 12 reporting periods (there are 13 reporting periods per year). Source: First ScotRail
60. The review team involved specialist internal staff to help model Exhibit 9 options and scenarios. Transport Additional North Berwick services and Musselburgh stops Scotland has indicated that the Transport Scotland identified a need for an additional evening service on modelling work was based on the Edinburgh to North Berwick route, together with two additional stops industry best practice. For example, at Musselburgh, to meet the needs of the relocated Queen Margaret Transport Scotland used the Network University College. Modelling Framework and drew on the Department for Transport’s However, First ScotRail could not justify the expenditure as the £100,000 templates and guidance on franchise in costs to provide the services was greater than its likely share of continuation.30 It also engaged expert revenue. The estimated revenue from the services was £172,000. Given external consultants to review the revenue performance at the time, it was likely that First ScotRail would modelling work. Separate external have to return 50 or 80 per cent of the revenue to Scottish ministers, consultants provided advice on allowing it to retain, at most, £86,000 of the revenue, resulting in a loss to the procurement implications for a First ScotRail of at least £14,000 and up to £64,600. franchise extension. Acknowledging that the services were required, Transport Scotland had to 61. As part of the review, Transport allow a reduction in the franchise subsidy payment to First ScotRail and an Scotland wished to encourage increase in the level of revenue First ScotRail could retain (specific to the further performance improvement service). This was necessary in order for First ScotRail to earn enough in by resetting performance targets in profit from the services to make them a viable addition. line with current performance. Of the three options, only the two that involved changes to the contract Source: Transport Scotland would provide Transport Scotland with the opportunity to introduce the desired improvements.
30 The Network Modelling Framework is a Britain-wide rail network modelling tool, developed by the Department for Transport, Transport Scotland, the Office of Rail Regulation and Network Rail. 20
Exhibit 10 Timeline for the franchise contract options appraisal and approval of the extension
Transport Scotland’s review took approximately 18 months. According to advice from the consultants appointed by Transport Scotland, the time needed to undertake a review of performance in preparation for a re-tendering exercise would be in the region of 18 months. This was based on the consultants’ knowledge of experience elsewhere in Britain.
Transport Scotland conducts forecasts, analyses options and negotiates with First ScotRail
Transport Scotland commences
Route Utilisation Transport Scotland Strategy published Transport Scotland agrees proposal acknowledges need to seek ministers’ High Level Output to review contract views (19 March) (autumn 2006) Specification published
J F M A M J J A S O N D J F M A M J J A S O N D J F M A 2006 2007 2008 Scotland general Transport Scotland Extension to election begins considering franchise contract service improvement announced (2 April) Scotland’s Railways options published Minister approves extension First ScotRail outstripping (27 March) performance targets and returning Minister agrees to formal 80% of additional revenue review of existing agreement Transport Scotland’s Investment External consultants engaged to provide advice Decision Making (IDM) board and review Transport Scotland’s analyses confirmed the extension (28 March)
Contextual events Appraisal & approval components
Source: Audit Scotland
62. However, First ScotRail was for services could be unclear at the inflation; passenger numbers; reluctant to commit to improvements time operators would submit their revenue growth; and First ScotRail’s without some incentive. Transport bids. Transport Scotland believes this performance. The modelling also Scotland recognised that the three- could have resulted in bids requiring took account of anticipated service year extension could be a significant higher subsidy levels to cover the and infrastructure changes and incentive to securing First ScotRail’s potential risks. improvements. agreement to more challenging performance benchmarks and other 63. Transport Scotland continued 64. Transport Scotland’s modelling and service improvements. Additionally, to develop and review options negotiations indicated that, over the a number of major rail projects are throughout 2007 and into 2008, existing seven-year term, and based planned between 2011 and 2014. and undertook negotiations with on what it considered the most likely Transport Scotland was aware that First ScotRail throughout this revenue levels if the contract was re-letting the franchise in 2011 period. The review team, working not amended, it would be possible would therefore require a more with colleagues, modelled a range to secure investment of £25 million complex bid specification process to of scenarios. The scenarios were from First ScotRail in exchange for accommodate the projects and that generated by varying a range of an estimated £20 million in potential the consequences of these projects factors, including: economic growth; revenue return to the Scottish Part 2. The franchise extension 21
Government. However, by offering the performance across any 12 69. Transport Scotland indicates that extension it could secure investment consecutive months at 98 per cent the review team considered risks of £65 million in exchange for potential of its 2007/08 performance during meetings, although the team revenue of £57 million. In addition, did not record this activity and a with the extension option, the • fails to deliver its committed formal risk register was not prepared review team was able to negotiate passenger service obligations or until a relatively late stage in the an additional £8.1 million by making specified service improvement process (August 2007). a case that FirstGroup would save options called by Scottish a significant sum by not having to ministers 70. Transport Scotland’s board is an submit a new tender in 2011 and advisory body, without a legal identity. First ScotRail could secure additional • has on more than one occasion Its role is to support and advise the revenue from service improvements not submitted a remedial plan or chief executive. The board consists to 2014. agreed to a remedial agreement of the chief executive and the five within the required time periods executive directors, along with two 65. On concluding the core review (should First ScotRail receive any non-executive members. Transport work in early 2008, Transport Scotland remedial notices) Scotland’s chief executive is formally aimed to secure ministerial approval accountable for the performance of and introduce the extension in time • has any business default event the organisation and for the advice for the next financial year, ie April (the various types of which are given to Scottish ministers on major 2008, to ensure maximum benefits detailed in the franchise contract, investment decisions. Transport and investment. The guaranteed for example breaching the law, Scotland’s Investment Decision investment of £73.1 million will failing to make payments to Making (IDM) board assists the chief allow Transport Scotland to either Transport Scotland, having any executive with major investment reduce the government subsidy or operating licences revoked, or decisions. The IDM board consists of to secure service improvements in going into administration). Transport Scotland’s chief executive line with the Scottish Government’s and its five executive directors. At strategic aims, such as introducing 67. The review team reported its meeting on 28 March 2008, the services with reduced journey times to Transport Scotland’s senior IDM board confirmed the extension and services that connect with other management throughout the process. of the franchise contract and transport providers. In order to avoid Transport Scotland also negotiated agreed the associated adjustments, the need for new negotiations on with First ScotRail regularly throughout described elsewhere in this report, all possible improvement options, the process to assess the viability of be implemented. Transport Scotland Transport Scotland’s contract review the options being considered at the has agreed that its non-executive team consulted with colleagues time. On 19 March, Transport Scotland members should not be part of and negotiated with First ScotRail to agreed to seek the minister’s views. the IDM board. In line with these secure a list of 28 price-agreed service Ministers announced the franchise procedures the non-executive improvement options to be included in extension on 2 April 2008. members of the board were not the extension.31 involved in the franchise review and Governance arrangements for the extension options. 66. Transport Scotland ensured that review process could have been there was no increase in the franchise better managed 71. Transport Scotland’s register of subsidy levels. It also ensured interests indicates that the director there was an option to cancel the 68. The original contract contained of Finance and Corporate Services extension. Scottish ministers can an option to extend the franchise holds shares and share options in choose, up until October 2009, to but did not specify the conditions FirstGroup. Transport Scotland’s end the franchise agreement at the under which an extension should be annual accounts also declare this original seven-year expiry date of considered, or the criteria to be used interest. The director of Finance and 2011 if First ScotRail: to decide whether an extension might Corporate Services was present at be appropriate. Transport Scotland key meetings in March at which the • does not at least maintain the reports that criteria were established rail franchise extension was discussed. new train running performance to determine whether the extension Good practice generally requires that improvement targets should be awarded, however, no members with an interest should formal record was made of the criteria declare it in advance and take no • does not at least maintain SQUIRE being approved. part in any relevant agenda item. The
31 Details of each of the 28 service improvement options (referred to as ‘priced options’) are in the franchise extension agreement, available on Transport Scotland’s website www.transportscotland.gov.uk. Scottish ministers retain the option to agree additional options with First ScotRail or to change the terms of the 28 options already secured. 22
minutes of the March meetings do (Regional Transport Partnerships, When developing the specifications not record if the director of Finance Passenger Focus, and the Scottish for the next franchise contract, and Corporate Services declared an Trades Union Congress) reported Transport Scotland should: interest or removed himself from that they were concerned at the discussions about the franchise lack of consultation and would have • continue to develop its extension. The register of interests appreciated a confidential, high-level management and planning and the management commentary in discussion to consider any additional arrangements, including the accounts indicate that Transport benefits that could be secured, or development of a systematic Scotland has put in place practices to potential risks that might arise, from project plan for awarding the address the potential conflict. Transport the extension. next franchise. This should Scotland’s chief executive has stated identify the key stages and that the director of Finance and 75. The lack of consultation created their timeframes, consultation Corporate Services has no vote on any practical difficulties. Transport Scotland strategy, decision-making decision-making relating to FirstGroup, anticipated that, as a consequence of criteria and reporting and and was not involved in the review the franchise extension, it may need approval arrangements process, including development of to provide support from 2011 to 2014 the options, although the director of for commitments currently funded • specify under what conditions Finance and Corporate Services was by other bodies. Transport Scotland an extension will be considered aware that a review was ongoing and intends to provide this support from or the criteria that will be used attended the meetings in March. the £73.1 million it received for the to decide whether an extension extension. However, given these is appropriate, should the next 72. Transport Scotland did not costs were not established prior to franchise agreement include an provide the Minister for Transport, the extension being awarded, they extension option Infrastructure and Climate Change with may reduce the amount of the £73.1 a fully documented business case, million that will be available for further • consider any relevant taking the view that presentations to investments. To date, one example of recommendations from the the minister were more appropriate. such costs has become evident. The recent National Audit Office The presentations were based on the Strathclyde Partnership for Transport report on letting rail franchises. option appraisal work. (SPT) agreed to fund the running costs for CCTV in its region’s stations until 73. Transport Scotland did not consult the end of the franchise. The SPT on the franchise review and extension reports that it anticipated this would be options with external bodies. First until 2011. Transport Scotland has now ScotRail informed Transport Scotland agreed to cover these ongoing costs, that the agreement was price of approximately £425,000 per annum, sensitive. Consequently, Transport for the three-year extension period. Scotland was concerned that public disclosure about the review Recommendations and negotiations could influence market activity and breach financial To improve the management of regulations. Transport Scotland did not the franchise Transport Scotland secure separate advice on this point, should: but is of the view that it balanced appropriately commercial sensitivities • clarify whether all other funding and the public interest. commitments relating to the franchise are secured until the 74. The option to extend the franchise end of the extended franchise was included in the original contract, term in November 2014. Where which Transport Scotland reports funding has not been secured, was widely consulted on. Transport Transport Scotland should clarify Scotland also contends that it was the arrangements. able to rely on the consultation for long-term strategic rail priorities undertaken between October and December 2005, which led to the publication of Scotland’s Railways. However, some organisations 23 Part 3. First ScotRail’s performance
Overall, First ScotRail’s performance to date has been good, and continues to improve. 24
Key messages 9.4 per cent of services were either delayed due to First ScotRail (eg, cancelled, or delayed by five minutes mechanical breakdowns), Network • Overall, First ScotRail’s or more), compared with 89.9 per Rail (eg, faults on the line and weather performance has been good, cent across all British services. First related incidents), and other TOCs and continues to improve: ScotRail’s PPM has increased by (ie, a First ScotRail service being 4.8 per cent since its first full year of delayed due to another TOC’s delay).33 – more trains are running operating (2005/06), compared with a Network Rail and First ScotRail have a on time and the number 3.5 per cent increase across Britain. co-located train running performance of seats provided has team who determine the allocation of improved, but unscheduled 77. First ScotRail’s Passengers’ Charter delay minutes. changes to timetabled sets out reliability and punctuality services have increased standards for each of its service groups. 79. The percentage of scheduled The Passengers’ Charter defines First services being cancelled has – overall, the quality of service ScotRail’s punctuality as the percentage increased since the previous both at stations and on trains of trains arriving at their final destination operator’s last full year of operating has improved within five minutes of the scheduled (2003/04), from 1.48 per cent to time for the urban (East, Central and 1.79 per cent of scheduled services in – passenger satisfaction has Strathclyde) service groups, within 2007/08 (12,631 services). However, increased ten minutes for the regional (Express, the percentage of these cancellations Highland and South West) groups, which were due to the operator have – the increase in passenger and within 30 minutes of scheduled reduced from 61.9 per cent in the numbers has exceeded time for the long-distance Caledonian previous operator’s last full year of Scottish Government Sleeper services to London.32 Each operating to 40.5 per cent in 2007/08. targets. month, First ScotRail is required to This is as a result of both a decrease provide discounts to season ticket in the number of cancellations due to • First ScotRail’s positive working holders if either or both of its reliability the operator (from 0.91 per cent of relationships with key rail sector and punctuality levels fall below the services to 0.73 per cent of services), bodies have also contributed to levels specified in its Passengers’ and an increase in the number due to improved performance. Charter. Reliability performance has Network Rail (from 0.53 per cent of not fallen below the specified levels for services to 1.02 per cent of services) • First ScotRail and its staff have any of the service groups since First (Exhibit 11). received a number of awards ScotRail began operating. Discounts since it began operating. have been provided for punctuality, 80. In its first full year of operating but performance has improved since (2005/06), First ScotRail cancelled First ScotRail’s train running and First ScotRail began operating, with no 5,036 services (0.73 per cent of service quality performance has service groups’ punctuality performance services), a 12.4 per cent decrease improved falling below its specified level between from the previous year. The number May 2007 and March 2008. of cancelled services increased 76. The ‘Public Performance Measure’ slightly in 2007/08 (to 5,118). (PPM) is the main method used in 78. First ScotRail is not able to However, this was mainly due to an Britain to assess the percentage of control completely a train service’s increase in cancelled services for the passenger train services that arrive on reliability and punctuality. Whether a Strathclyde service groups, mostly as time, that is, the combined reliability train arrives on time depends on the a result of train driver industrial action (ie, the train arrives) and punctuality performance of the service provider that affected services in the Glasgow (ie, the train arrives on time) of (First ScotRail), the infrastructure area. All other service groups passenger train services. For regional (Network Rail) and, to a lesser extent, experienced a further decrease in operators, including First ScotRail, the activities of other train operating cancellations made by First ScotRail.34 ‘on time’ is defined as arriving within companies (TOCs). First ScotRail five minutes of the timetabled arrival reports to Transport Scotland every 81. When examining whether time. In 2007/08, 90.6 per cent of four weeks on the number of First delays were due to First ScotRail, First ScotRail’s services arrived at their ScotRail services cancelled and the Network Rail or other train operating final destination on time (meaning number of minutes that services were companies, the number of delay minutes is used, rather than the
32 Details of the services within each of the service groups are in First ScotRail’s Passengers’ Charter on its website www.firstscotrail.com 33 Network Rail operates automated monitoring systems at various points on the rail network which record delay minutes. The system is audited by the Office of Rail Regulation. 34 The train running performance service groups are: East Coast; Express; Strathclyde PTE Diesel; Strathclyde Electric; South West Rural; Highland Rural; and Sleeper. Details of the services within each of these groups are in the franchise contract, available on Transport Scotland’s website www.transportscotland.gov.uk Part 3. First ScotRail’s performance 25
number of services, as a single service can experience delays due to Exhibit 11 different causes. The number of delay Responsibility for cancelled services minutes has decreased from Previous operator First ScotRail 1.3 million during the previous 100 operator’s last full year of operating Franchise operator (2003/04), to 961,000 in 2007/08 80 Network Rail under First ScotRail. This is equivalent to a decrease from an average of Other operators 2.0 minutes to 1.4 minutes per 60 service run. Transport Scotland, First ScotRail and Network Rail attribute 40 this improvement to First ScotRail and Network Rail actively addressing the 20 ercentage of cancelled services cancelled of ercentage causes for delays for which they are P each responsible. 0 2003/04 2004/05 2005/06 2006/07 2007/08 82. The average number of delay Year minutes per service run varies across Note: 2003/04 was the previous operator’s last full year of providing services, and 2004/05 is a mix of the previous operator and First ScotRail, which began operating in October 2004. the service groups, typically reflecting Source: Transport Scotland and First ScotRail longer delays on longer journeys.35 In 2007/08, passengers on the sleeper services experienced an average of Exhibit 12 18.8 minutes delay (with First ScotRail Responsibility for delay minutes responsible for 6.9 minutes) compared Since its first full year of operating, the number of delay minutes due to to an average 0.9 minutes delay on First ScotRail has decreased. the Strathclyde electric services (0.3 minutes due to First ScotRail). Previous operator First ScotRail 800 Franchise operator 83. The number of delay minutes 700 due to First ScotRail has reduced Network Rail by 43.6 per cent, from 577,000 in 600 Other operators the previous operator’s last full year 500 of operating to 326,000 in 2007/08 Disputed 400 (Exhibit 12).36 During 2007/08 alone, First ScotRail and Network 300 Rail reduced the number of delay
Delay minutes (000s) minutes Delay 200 minutes for which they were each responsible, by 12.4 and 16.2 per 100 cent, respectively. 0 2003/04 2004/05 2005/06 2006/07 2007/08 84. Transport Scotland inspectors Year conduct SQUIRE assessments at Note: 2003/04 was the previous operator’s last full year of providing services, and 2004/05 is a stations and on trains every four mix of the previous operator and First ScotRail, which began operating in October 2004. Each year weeks. First ScotRail passed 93 per the responsibility for a small percentage of the delay minutes is disputed but resolved over time, therefore more recent years include more disputed minutes. cent of its station inspections and Source: Transport Scotland and First ScotRail 96 per cent of its train inspections in 2007/08. Both have increased since the previous operator’s last full year of operating (2003/04), from 89 and 92 per cent, respectively.
35 The likelihood for delays increases the longer the journey. However, additionally, many of the longer routes in Scotland cover areas of single tracks, with any delay occurring on these areas then affecting rail traffic in both directions. The long-distance sleeper runs at night, when most track work is conducted, which can delay services. 36 The 326,000 delay minutes in 2007/08 due to First ScotRail could increase to a maximum of 365,500 if all the disputed minutes are attributed to First ScotRail. 26
Exhibit 13 First ScotRail’s service quality inspection performance for the areas on which passengers wish to see performance information, 2005/06 to 2007/08
Station performance areas Train performance areas
100 100
80 80
60 60
40 40
20 20 ercentage of inspections passed inspections of ercentage ercentage of inspections passed inspections of ercentage P P 0 0 e s n s y n s d t s nd n es ces a i tio r oilets io iness a t t l d n staff n aff cement isplays itter and L d ain toilets icket offic d securi tion on boards n lic ad omer care T enger Tr b n timetables Statio g/ventilatio Station Seat Station CCTVan ket collection ger facilitie rain st Sta c d information nati Pu T contami at key sta cust Station shelters Ti rain clean an seats, racks an T Sleeper serv Statio n
ai Desti and pass informatio in heatin Public announ Tr a
Tr ther passen o
2005/06 2006/07 2007/08 Benchmark
Source: Transport Scotland
85. Twenty of the 36 service Passenger satisfaction has increased 88. First ScotRail achieved a quality performance areas achieved significant increase in five satisfaction performance above benchmark levels 87. Passenger Focus conducts a areas between spring 2007 and 2008, in 2007/08, compared with 15 in First national survey of rail passenger including overall satisfaction (Exhibit ScotRail’s first full year of operating satisfaction across Britain every six 14). Overall satisfaction increased (2005/06). Additionally, First ScotRail months. Of the 32 satisfaction areas from 83 per cent to 88 per cent, has demonstrated performance included in the spring 2008 survey, First ScotRail’s highest rate of overall improvements in 22 of the 36 service First ScotRail achieved more than satisfaction to date. Satisfaction with quality performance areas since 75 per cent satisfaction in half of the car parking facilities, however, has 2005/06. However, performance has satisfaction areas. The two highest decreased by 11 per cent to 44 per declined in five of the service quality areas of satisfaction were ‘the length cent of First ScotRail passengers performance areas, with no change of time the journey was scheduled surveyed. Passenger Focus reports in the remaining nine areas (see to take’ (91 per cent) and ‘how your that passengers’ dissatisfaction with Appendix 3 for further details). request to station staff was handled’ car parking facilities is predominantly (89 per cent). However, less than half with the number of parking spaces 86. In 2007/08, all of the performance of First ScotRail’s passengers were available, rather than the way First areas on which passengers wish to satisfied with the ‘station facilities and ScotRail manages or maintains the see performance information passed services’ (49 per cent), ‘facilities for spaces. Transport Scotland and First 90 per cent or more of their inspections, car parking’ (44 per cent), ‘train toilet ScotRail are currently conducting except for ‘litter and contamination’ at facilities’ (40 per cent) and ‘how well feasibility studies into additional stations (82 per cent) and ‘train toilets’ the train company dealt with delays’ car parking. (81 per cent) (Exhibit 13).37 (37 per cent).
37 These performance areas were identified in a summer 2006 customer research study commissioned by Transport Scotland. Part 3. First ScotRail’s performance 27
Exhibit 14 Focus can make an appeal complaint to First ScotRail on the passenger’s Significant changes in First ScotRail’s passenger satisfaction between behalf. The number of complaints spring 2007 and 2008 received by First ScotRail between Satisfaction area % of surveyed passengers satisfied 2005/06 (its first full year of operating) and 2007/08 decreased by two per First ScotRail Average Average across cent, from 3,905 to 3,826 complaints across regional Britain Spring Spring per 100,000 passenger journeys. operators spring 2008 2007 2008 In 2007/08, the four most frequent spring 2008 categories of complaints were train Overall satisfaction 83 88 84 80 service performance (39.8 per cent), Ticket buying facilities 75 82 79 71 followed by quality on train (15.5 per cent), fares, retailing and refunds Upkeep/repair of station buildings/ 66 76 69 62 (14.8 per cent) and staff conduct and platforms availability (11.4 per cent). These were also the top four complaint categories Staff availability at 59 65 60 56 across Britain. Between 2005/06 and stations 2007/08, First ScotRail reported a Punctuality/reliability 83 87 83 79 64 per cent increase in the number Car parking facilities 55 44 49 43 of compliments received, from 881 to 1,447. Significant increase Significant decrease Safety performance has improved Source: National Passenger Survey, Passenger Focus 92. First ScotRail’s safety incidents 89. First ScotRail achieved higher • Overall satisfaction (from 84 per (injuries, assaults and unsafe practice) satisfaction levels than the British cent to 88 per cent). decreased by 18 per cent between average for 31 of the 32 satisfaction 2005 and 2007, from 8.42 to areas in the most recent survey • Providing information about train 6.91 incidents per million passenger 40 (spring 2008). Of passengers’ eight times and platforms (from 74 per journeys. Unsafe practice, passenger main satisfaction areas, First ScotRail cent to 80 per cent in spring 2005, and staff safety incidents all decreased achieved higher satisfaction levels with no significant change since). (by 17 per cent, 15 per cent and than the British average in seven 32 per cent, respectively). areas and in six areas compared • Punctuality and reliability (from 81 with the regional operators’ average per cent to 87 per cent). Passenger growth has exceeded (Exhibit 15).38, 39 The satisfaction targets area below both the British average • Dealing with delays (from 31 per and the regional operators’ average cent to 41 per cent in spring 2005, 93. Since the start of First ScotRail’s was ‘connections with other forms and no significant change since). first full year of operating (2005/06) of public transport’, with ‘value for to the end of 2007/08, First ScotRail money’ below the regional operators’ • Current satisfaction levels with the has experienced an average 5.8 per average. four remaining main satisfaction cent increase each year in the number areas have not changed significantly of passenger journeys made on its 90. Of the eight main satisfaction since the previous operator. services. This has exceeded the areas in the National Passenger Scottish Government’s target of a two Survey, First ScotRail’s satisfaction 91. First ScotRail has a Passengers’ per cent growth each year, and is similar levels have increased since the Charter, a complaints procedure to the growth experienced for Britain previous operator (last surveyed in and associated compensation during this time (an average 5.7 per cent 41 spring 2004) for four of the areas: arrangements. If a passenger is increase each year). The increase in dissatisfied with First ScotRail’s First ScotRail’s passenger numbers may response to a complaint, Passenger be inflated by its efforts to address fare
38 The eight main satisfaction areas were identified through research by the Strategic Rail Authority in 2005; and Passenger Focus in 2007 assessing passengers’ priorities. 39 Passenger Focus categorises the operators into one of three groups: long distance; London and the South East; and regional operators. First ScotRail is classed as a regional operator (along with Arriva Trains Wales, Gatwick Express, Merseyrail and Northern Rail). Passenger Focus is currently reviewing the appropriateness of its categorisation of operators. 40 Safety performance is reported by calendar year while passenger journeys are by financial year. Therefore safety incidents per million passenger journeys uses the passenger journeys figure for the financial year commencing during that calendar year (eg, for 2005 safety incidents per million passenger journeys is calculated with the number of safety incidents in 2005 and the 2005/06 number of passenger journeys). 41 The Scottish Government’s target for a two per cent growth in passenger journeys is not part of the franchise contract. 28
is pro-active in meeting and, in some Exhibit 15 cases, exceeding these obligations. Passengers’ eight main satisfaction areas, spring 2008 For example:
Overall satisfaction • First ScotRail and Network Rail’s co-located train running Provision of information about train times/platforms performance team work together Connections with other to address delays. forms of public transport Punctuality/reliability (ie, the train • First ScotRail and the BTP conduct arriving/departing on time) joint patrols. First ScotRail fully How well train company funds joint BTP and First ScotRail Satisfaction area Satisfaction dealt with delays press releases and offers rewards Frequency of the for information to assist BTP trains on that route investigations. Value for money for the price of your ticket Sufficient room for all the • Passenger Focus reported that passengers to sit/stand First ScotRail promptly addresses issues arising out of the National
Percentage of surveyed passengers satisfied Passenger Survey.
First ScotRail Regional operators average British average • First ScotRail has held an open day for other train operating companies Source: National Passenger Survey, Passenger Focus to share good practice.
98. The Regional Transport evasion, which is likely to have resulted 96. Most of the £23.2 million has Partnerships (RTPs) were established in more accurate recording of passenger been spent on fixtures, fittings at different times. While the longer journeys. and equipment (69 per cent), and established RTPs have clearer improvements to stations communication and consultation Most capital improvements have (29 per cent). Of the 17 capital arrangements with First ScotRail, been completed ahead of schedule investment programme spend areas, all partnerships felt First ScotRail’s six were completed by the end of consultation with them could be 94. As part of its bid for the franchise, March 2008, five of them ahead of more formal, regular and timely. First ScotRail offered to fund a the agreed completion date. However, For example, they felt timetabling programme of capital improvements improvements to the sleeper services consultations were held too late in including station buildings and were completed 14 months behind order for comments to be fed into the facilities improvements, new car schedule. First ScotRail reports this proposed timetable. parking spaces, CCTV and ticket was due to the initial timescales being machines. First ScotRail is required underestimated. 99. First ScotRail also reported to spend £40 million on the capital that integrated transport can be programme during the first seven First ScotRail’s good working hampered when connecting transport years of the contract.42 relationships with key rail sector providers change their timetables bodies have also contributed to without consulting First ScotRail in 95. By the end of March 2008, First improved performance sufficient time to allow First ScotRail ScotRail had spent £23.2 million on to accommodate the changes in its the capital investment programme. 97. The franchise contract sets out timetables. Currently, there is not Transport Scotland reviews annual First ScotRail’s co-operation and an obligation across all public expenditure forecasts from First ScotRail consultation requirements with other transport providers to consult with to ensure the £40 million is spent by rail sector bodies. Network Rail, other other affected transport providers October 2011. The most recent forecast rail operating companies, the British when proposing service or (from October 2007) indicates that the Transport Police (BTP), Passenger timetable changes. total capital investment programme Focus and disability groups all spend, taking account of inflation, will be reported that First ScotRail fulfils and £43.9 million.
42 The £40 million investment in the capital programme is in 2004/05 prices. Annual payments towards the programme are RPI inflated accordingly. Part 3. First ScotRail’s performance 29
First ScotRail has received a number of awards
100. First ScotRail has received a number of awards, including the National Transport Awards ‘Public Transport Operator of the Year’ (2006); the Scottish Transport Award (2007); the HSBC Rail Business Awards ‘UK Train Operator of the Year’ award (2008); and the Human Resources Excellence Awards ‘Best Learning & Development Strategy’ (2008).
101. First ScotRail’s managing director has also received the Passenger Transport Management Awards ‘Passenger Transport Professional of the Year’ award (2008); the Quality Scotland ‘Leadership Award’ (2008); the Spirit of Scotland Awards ‘Business person of the Year’ award (2006); the Institute of Directors Scotland ‘Director of the Year’ award (2006); the Insider Elite Awards ‘Businesswoman of the Year’ award (2005); and the Scottish Transport Awards ‘Young Professional of the Year’ award (2005).
Recommendation
The Scottish Government should consider:
• introducing an obligation for all public transport providers to consult with other affected transport providers when proposing service or timetable changes to assist further integrated transport improvements. 30 Appendix 1. Fares structure for First ScotRail passenger services
Fare type1 How fare price changes are determined2 Strathclyde Passenger Transport Area (SPTA) Any increase or decrease in these fares is controlled fares determined by Scottish ministers, and comes into effect in May each year. Single and return fares, and weekly, monthly, quarterly, seasonal and annual season tickets for services between SPTA stations and designated services between SPTA stations and stations within 25 miles beyond the SPTA.3
30.1% of fare revenue in 2007/08 Regulated commuter fares First ScotRail decides whether to increase or decrease these fares. However, the Scottish Covers the Edinburgh commuter zone.4 ministers’ fares policy restricts the extent to which the fares can be increased (schedule 5 of 8.2% of fare revenue in 2007/08 the franchise contract provides further detail). Any increases in fares come into effect in January each year.5 Other regulated fares First ScotRail decides whether to increase or decrease these fares. However, the Scottish Off-peak returns and weekly, monthly, quarterly, ministers’ fares policy restricts the extent to seasonal and annual season tickets for services not which the fares can be increased (schedule 5 of covered by the regulated commuter fares and the the franchise contract provides further detail). SPTA controlled fares. Any increases in fares come into effect in January each year. 14.5% of fare revenue in 2007/08
Unregulated fares First ScotRail decides whether to increase or decrease these fares. As the fares are All remaining fares – predominantly standard single, unregulated, the Scottish ministers’ fares policy open return, and first class fares for services not does not place any restrictions on the extent to covered by the commuter fares and the SPTA which these fares can be increased. controlled fares.
47.2% of fare revenue in 2007/08
Notes: 1. Scottish ministers can, via a variation to the franchise contract, change the number, content and/or geographical boundaries of the fares in each fare type, and regulate or specify fares for any passenger services. Performance benchmarks can be re-set if they are likely to become either harder or easier to achieve due to changes in passenger demand levels on affected services as a result of Scottish ministers’ changes to fares. 2. First ScotRail requires Scottish ministers’ consent for any other increases to regulated or controlled fares it wishes to apply in addition to that allowed, for example, if in connection with service improvements relevant to the particular fare/s. 3. SPTA stations include Glasgow Central High level, Prestwick International and any other west central Scotland stations as designated by the Strathclyde Passenger Transport Area (Designation) Order 1995. 4. This covers services within and including the boundary of Kirkcaldy, Glenrothes with Thornton, North Berwick (but not Dunbar), Addiewell, Bathgate, Falkirk High and Falkirk Grahamstone. 5. Transport Scotland and First ScotRail are currently considering options for all fares to come into effect in either January or May. 31 Appendix 2. Membership of the project advisory group
Member Organisation Gary Bogan Head of Network Relations and Futures, Transport Scotland Ivor Jones1 Head of Rail Franchise Management, Transport Scotland Mike Price Head of Contracts, First ScotRail Alan Scott1 Franchise Partnership Manager, First ScotRail Jo Noble Customer Relationship Executive for First ScotRail, Network Rail Valerie Davidson Assistant Chief Executive, Business Support, Strathclyde Partnership for Transport Robert Samson Passenger Link Manager for Scotland, Passenger Focus Fiona McCall Committee Member, Mobility and Access Committee for Scotland
Note: 1. Attended a project advisory group meeting when the designated member was not available. 32 Appendix 3. Service QUality Incentive REgime (SQUIRE) performance areas
The full SQUIRE schedule service agreement is available The performance areas are ranked from highest to lowest on the Transport Scotland website in terms of the amount of penalty and payment points that www.transportscotland.gov.uk can be awarded.
The shaded performance areas indicate the areas that The benchmark is the target per cent of inspections passengers wish to see performance information to pass. First ScotRail incurs a penalty if less than the reported on.1 benchmark is achieved and receives a payment when it achieves more passes than the benchmark level.
Station performance areas Benchmark % 2007/08 Improvement performance % or decline since 2005/06 % Graffiti 75 83 11 Station shelters and waiting areas 90 93 7 Ticket collection at key stations 97 100 2 Litter and contamination 95 82 10 Car parks and taxi ranks 90 95 9 Station lights 75 84 2 Station CCTV and security 90 91 1 Station posters 85 90 -1 Station seats 90 98 0 Station lifts and escalators 90 97 4 Public announcement and customer information 95 93 2 systems Ticket offices 99 98 2
Help points, telephones and ticket machines 90 87 3
Station fault/complaint record 95 89 8 Station toilets 97 94 0 Station staff 95 99 1 Landscaping and vegetation 90 99 0 Lost luggage 95 100 0 Station clocks 94 97 1 Station timetables and information 99 97 7
Note: 1. The performance areas were identified in a summer 2006 customer research study commissioned by Transport Scotland. Appendix 3. 33
Train performance areas Benchmark % 2007/08 Improvement performance % or decline since 2005/06 %
Train cleanliness 96 99 0
Train seats, racks and other passenger facilities 90 90 -2 Train graffiti 99 97 15 Train lighting 95 93 -1 Ticket inspection on trains 97 99 2 Train posters/on-train information 90 99 0 Public address 95 95 6 Sleeper services 95 92 -4 Destination boards and passenger information 95 91 5 displays Train staff and customer care 95 99 2 Train toilets 99 81 -4 On-train CCTV 90 83 34 Train heating/ventilation 99 100 0 Train doors 99 95 0 Seat reservation system 95 98 0 On-train refreshment and food facilities 95 93 7
Other performance areas Benchmark % 2007/08 Improvement performance % or decline since 2005/06 % Management and processes Not assessed in 100 100 2005/06 Information provision away from stations Not assessed in 99 100 2005/06 The First ScotRail passenger rail franchise
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