Regulation, consumers and competition

Action to Improve Passenger Rail Services

Sir John Bourn, head of the National Audit Office, told Parliament today that the Shadow Strategic Rail Authority (SSRA) and its predecessor organisation, the Office of Passenger Rail Franchising (OPRAF), had taken action where possible to remedy underperformance by passenger train operators but that the present franchise arrangements could be improved to secure better performance. [...]

Report cover showing a train at a platform

    Sir John Bourn, head of the National Audit Office, told Parliament today that the Shadow Strategic Rail Authority (SSRA) and its predecessor organisation, the Office of Passenger Rail Franchising (OPRAF), had taken action where possible to remedy underperformance by passenger train operators but that the present franchise arrangements could be improved to secure better performance. The current process of franchise replacement provides an ideal opportunity to implement these improvements.

    OPRAF had used the powers available to it in the franchise agreements but these were, on the whole, not designed to raise standards significantly beyond those achieved by British Rail. The National Audit Office identified the following weaknesses in the current franchises which were agreed in 1996 and 1997:

    • incentive regimes, which provide financial rewards or penalties for achievement against standards set for punctuality and short-forming trains, are not very effective because the payment rates are too low. In 1999-00, SSRA received £25.6 million in penalties from train operators and paid £22.3 million in incentives. The SSRA intends to double the payment rates in replacement franchises;
    • the enforcement regime, which gives powers to the SSRA to demand remedial action in the event of operational performance below a certain standard, works to bring performance back to that standard but only applies to the number of cancellations (reliability) and seats provided (capacity) each month. Train operating companies cannot be forced to take action to improve punctuality. The National Audit Office recommends that the SSRA should be able to take enforcement action for poor punctuality;
    • the performance standards for reliability and capacity were set at the levels achieved by British Rail and the current franchise agreements contain no provision for the standards to be raised. Those standards are now too low in the case of some train operators. The National Audit Office recommends that new franchises should allow the SSRA to raise all performance benchmarks through the life of the franchise;
    • there is some evidence that the deterrent effect of enforcement action can influence train operators to act in ways which are not in the best interests of passengers. The SSRA needs to do more work to establish the nature and extent of such perverse incentives;
    • passenger numbers are growing fast in all areas of Great Britain but the information currently available to the SSRA on overcrowding is not very accurate. Moreover, franchise agreements only require overcrowding to be measured on London and Edinburgh commuter routes. The SSRA is seeking to encourage train operators to adopt more accurate and flexible electronic systems to replace the current manual counting system; and
    • OPRAF relied on passenger satisfaction surveys and self-certification by train operating companies to monitor the quality of service delivered by train operators. By Summer 1999 passenger satisfaction was, on the whole, lower than on franchising. In January 2000, the SSRA launched a new national survey of passengers to take place twice a year. It intends, in the new franchises, to link satisfaction levels to an incentive regime as a new way to try to raise passenger satisfaction. The National Audit Office recommends that it also institute a programme of station inspections, considers whether the current standards for stations are adequate, and whether a ‘mystery shopping’ approach it is currently piloting could be brought within the terms of franchise agreements.

    The NAO found that punctuality and reliability had changed little in the period since franchising, although more train services are now run. Currently, around 87 per cent of trains arrive within 5 minutes of schedule and 1.2 per cent are cancelled. Average standard class fares have been held below inflation but overcrowding is likely to become a growing problem as passenger numbers increase faster than service capacity.

    Sir John commented:

    “OPRAF did what it could to improve passenger rail services within the powers available to it. Although overall performance has been marginally better than British Rail there is not yet evidence of sustained improvement over time. The SSRA must ensure that it has both the information and the powers it needs to deliver the further improvements in punctuality, reliability, capacity and quality of service that we all want to see.”

    Notes for Editors

    The Franchising Director, the head of the Office of Passenger Rail Franchising (OPRAF), a non-ministerial department, awarded the franchises to run passenger rail services by March 1997. In July 1999, pending legislation to create a Strategic Rail Authority, OPRAF became part of the Shadow Strategic Rail Authority (SSRA). Mike Grant, the Franchising Director since May 1999, was appointed Chief Executive of the SSRA and Sir Alastair Morton was appointed to be its Chairman.

    Net subsidies paid by OPRAF (and now the SSRA) to the 25 train operating companies fell from £1.4 billion in 1997-98 to £1 billion in 1999-00.

    In 1999, the SSRA began a process to replace the existing franchises most of which have at least three more years to run. Bids have been invited for 6 franchises so far but no successor franchisees have yet been announced.

    The National Audit Office looked at the performance of passenger rail services since franchising began in 1996; examined the record of OPRAF in managing the franchises; and considered whether there was more that OPRAF, and now the SSRA, could do to try to improve performance.

    Press notices and reports are available from the date of publication on the NAO website at http://www.nao.org.uk/ Hard copies can be obtained from The Stationery Office on 0845 702 3474.

    The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office employing some 750 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

    Press Notice 53/00
    All enquiries to NAO Press Office:
    Tel: + 44 (0) 20 7798 7400


    Publication details:

    ISBN: 0105569402 [Buy from TSO]

    HC: 842 1999-2000

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