SPICe AMENDED SCOTRAIL FRANCHISE briefing ALAN REHFISCH 23 July 2008 This briefing outlines the changes to the Scottish passenger rail (ScotRail) 08/38 franchise agreement. This is the key document governing the provision of passenger rail services in Scotland, which were announced by the Scottish Government on 3 April 2008. Scottish Parliament Information Centre (SPICe) Briefings are compiled for the benefit of the Members of the Parliament and their personal staff. Authors are available to discuss the contents of these papers with MSPs and their staff who should contact Alan Rehfisch on extension 85158 or email [email protected]. Members of the public or external organisations may comment on this briefing by emailing us at [email protected]. However, researchers are unable to enter into personal discussion in relation to SPICe Briefing Papers. 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Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes. www.scottish.parliament.uk 1 CONTENTS KEY POINTS ................................................................................................................................................................3 INTRODUCTION ..........................................................................................................................................................4 BACKGROUND............................................................................................................................................................4 THE SCOTTISH PASSENGER RAIL FRANCHISE (SCOTRAIL) ..............................................................................4 LEGISLATIVE BASIS FOR PASSENGER RAIL FRANCHISING ..............................................................................4 THE AMENDED SCOTRAIL FRANCHISE..................................................................................................................5 ANNUAL FRANCHISE PAYMENTS ..................................................................................................................................5 TARGET REVENUE FIGURES, REVENUE SHARE AND REVENUE SUPPORT .......................................................................6 PRICED OPTIONS ........................................................................................................................................................7 NEW COMMITTED OBLIGATION.....................................................................................................................................7 EXTENSION CRITERIA..................................................................................................................................................7 PROFIT SHARE .........................................................................................................................................................10 LONG FORM REPORTING...........................................................................................................................................10 MAJOR PROJECTS ....................................................................................................................................................10 COMMONWEALTH GAMES..........................................................................................................................................11 FARES FROM NEW STATIONS ....................................................................................................................................11 ADDED VALUE ..........................................................................................................................................................11 EXTENSION TRIAL PERIOD.........................................................................................................................................11 SCOTTISH MINISTERS POLICY AND SPECIFIC INITIATIVES ............................................................................................12 SOURCES ..................................................................................................................................................................12 APPENDIX 1: LIST OF PRICED OPTIONS ..............................................................................................................13 providing research and information services to the Scottish Parliament 2 KEY POINTS • The current ScotRail franchise was awarded to First Group by the Strategic Rail Authority, acting on behalf of the previous Scottish Executive, and the then Strathclyde Passenger Transport Executive on 20 August 2008 • The current ScotRail franchise began on 17 October 2004 and was due to run until October 2011, with the option of a three year extension • The current Scottish Government announced on 3 April 2008 that it intended to extend First Group’s tenure as ScotRail franchisee by three years • The amended franchise places new performance requirements on First Group, revises certain financial aspects of the franchise and establishes a new profit sharing mechanism • The new financial arrangements set out in the amended franchise agreement are backdated, i.e. they are deemed to have come into force on 1 April 2007. The revised performance benchmarks came into force on 1 April 2008 and the remaining terms came into force when the agreement was signed • The extension of the franchise is conditional up until 1 October 2009. During the period up until 1 October 2009, Scottish Ministers may choose to end the franchise at the initial expiry date if First Group fail to meet certain performance standards • The Scottish Government decided to extend the franchise without consulting the Scottish Parliament, railway trade unions and passenger groups providing research and information services to the Scottish Parliament 3 INTRODUCTION This briefing provides a short background to the history of rail franchising in the UK and of the ScotRail franchise. It goes on to examine the changes made to the current Scottish Passenger Rail (ScotRail) franchise, which has recently been extended, and is held by First Group. BACKGROUND The current privatised railway system was established by the Railways Act 1993 (c.43) as amended by the Transport Act 2000 (c.38) and the Railways Act 2005 (c.14). The vast majority of passenger train services in the UK are provided by franchised passenger Train Operating Companies (TOCs), i.e. companies which have been granted a ‘franchise’ to provide passenger rail services by the Department for Transport (DfT) or for Scottish rail services the Scottish Executive. The granting of franchises was previously carried out by the Strategic Rail Authority (SRA), which was wound up following the passage of the Railways Act 2005. 26 franchised TOCs were created when British Rail was privatised, although this has slowly been reduced by the UK Government to the current 20. Each franchise, i.e. a concession to operate trains on designated lines or geographic areas for a fixed period of time, was awarded to the bidder that provided the Government with the greatest return or required the least amount of subsidy to operate an agreed level of service. The SRA applied additional quality related criteria in awarding the second round of UK rail franchises. THE SCOTTISH PASSENGER RAIL FRANCHISE (SCOTRAIL) The ScotRail franchise was the last of British Rail’s passenger TOCs to be privatised on 1 April 1997, and is currently the largest franchise in terms of route-kilometres, number of trains run and stations operated. The original ScotRail franchise was awarded to the National Express Group. ScotRail provides approximately 95% of passenger train services in Scotland plus the overnight Anglo-Scottish Caledonian Sleepers linking Edinburgh, Glasgow, Aberdeen, Inverness and Fort William with London. The remaining 5% of rail services in Scotland are long distance cross-border trains provided by National Express East Coast on the East Coast Main Line, Virgin Trains on the West Coast Main Line, Arriva Trains on the inter-regional CrossCountry network and First Group on Transpennine Express linking Edinburgh and Glasgow with Manchester airport. The current ScotRail franchise was awarded to Aberdeen based First Group on 20 August 2004 and was due to run from 17 October 2004 until October 2011, with an option for a three year extension. This option was exercised by the Scottish Government, subject to conditions, on 2 April 2008. LEGISLATIVE BASIS FOR PASSENGER RAIL FRANCHISING The system of rail franchising was established by the then Conservative UK Government under the Railways Act 1993. The 1993 Act, as amended, requires the franchising authority (in Scotland this is now the Scottish Government) from time to time to hold an open competition for the award of a franchise to provide designated Scottish passenger rail services. providing research and information services to the Scottish Parliament 4 THE AMENDED SCOTRAIL FRANCHISE Scottish Ministers and First Group signed an agreement on 2 April 2008 to extend First Group’s tenure as ScotRail franchise holder from the initial franchise expiry date of 15 October 2011 until November 2014. The new financial arrangements set out in the amended franchise agreement