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Williams-Shapps Plan For Rail: a flexible future

Jason Hurst Jason Hurst

The Williams-Shapps review has been published and is being received well. In the first of a series of articles, Jason Hurst looks at what this long-awaited report will mean for the railway industry and how Great British Railways will need to drive whole-industry flexibility.

Following the disruption caused by the May 2018 timetable change, a 'root and branch' review of the railways was launched on 20 September 2018, being the most significant since privatisation. Keith Williams, former British Airways Chief Executive, was asked to lead the review as an independent chair.

One of the challenges identified as a barrier to improving and modernising the railway was the lack of flexibility, highlighted early on by Keith in The Bradshaw Address. And, if the last year has taught us one thing about rail, it's that being able to react quickly to changing events is critical to maintain the future viability of the railway.

It's likely that there will be an evolving landscape for years to come and having an agile industry with the ability to react dynamically will be a key requirement for the railway, for example:

Short-to-medium term: The changing travel habits of people will likely take a number of years to settle down. If, indeed, they do ever 'settle'.

Medium-to-long term: The impact of technology and a focus on the government's 'net-zero' target, will change (potentially both positively and negatively) rail's role in a holistic transport solution.

Long term: The significant change that HS2 will have across the whole of the network, in terms of timetables and innovation driven by the investment being made.

The Plan For Rail

One thing is certain – flexibility across the rail system will be needed. Under the Williams-Shapps Plan For Rail, published on 20 May 2021, the rail network will fall under the new Great British Railways public body, which will have a significant role to play in driving agility across the whole industry.

Through a simplified industry and integrated approach to the infrastructure and train operations, we believe this agility could be achievable. But will require the whole industry to work together including infrastructure, operations, regulation and unions.

The design of Great British Railways, its contracts with the private sector, and its relationships with other bodies must be designed to enable flexibility through an agile approach to meet the future demand for rail.

Change is here to stay

COVID-19 has impacted the railway in ways that couldn't have been imagined before. The traditional franchising system has, as a result, been replaced in a much shorter timeframe than would otherwise have been the case.

Coronavirus has caused significant change over a relatively short period of time, It has highlighted the need to react to change and brought some of the fundamental barriers to achieving change into focus. The railway will continue to change and evolve over the years and decades to come:

Passenger travel patterns will evolve with increased remote working. 36% of the employed population participated in some degree of home working in 2020 and this is set to be embedded in people's future working patterns.

The time at which people travel may change. For example, they may avoid peak-time travel and the industry will need to respond to demand changes. Cost savings may arise over time from any reduction in the peak-time requirement but additional capacity at off-peak time may be required.

The commitments set out in the Williams-Shapps Plan For Rail will take time to deliver. From delivering reforms under existing contracts to deliver better outcomes for passengers early through to delivering wider reforms once legislation is in place to establish Great British Railways.

Not to mention, technology is advancing at a rapid pace, which will have an impact on people’s journey choices. This includes enabling flexibility of fares, increased integrated information for passengers and rail’s role in the wider transport system where modes are changing rapidly.

The commencement of HS2 services will also have a significant impact on the rail network, re-writing almost the entire timetable. This won't occur just once, but in multiple stages as the phases of HS2 are completed, and innovation from the significant investment in the project will need to be captured and rolled out quickly across the existing network.

Change will continue to happen, and the whole industry will need to play its part to maximise the benefit of these changes.

Growth has been significant despite an inflexible structure

Since privatisation, franchising has delivered substantial growth from 39 billion passenger kilometres in 1996 to 83 billion in 2019. This has transformed a declining industry into a thriving one, driven by incentivising the operator to maximise revenues through transferring revenue risk to the private sector. 

However, over this time the structure of the industry has become increasingly complex and inflexible. The Williams-Shapps Plan for Rail has sought to set out a vision to tackle this complexity through a simplified structure.

An example of this is the approach to franchising, which was built on setting a fixed premium or subsidy awarded following a competitive process, to deliver the fixed base requirements set by the contracting authority.

Change could be agreed in life, but would typically involve lengthy negotiations between the authority and each operator that was impacted. This made significant change across multiple franchises difficult, if achievable at all.

Flexibility needs to be built in at every level

It must be acknowledged that inflexibility in the franchise contracts isn't the only issue that needs to be addressed. Flexibility will be required across the whole industry so that it can deliver for passengers and freight users.

This includes flexibility within Great British Railways, the industry systems and payment mechanisms, and in how it contracts with its private sector partners through the new Passenger Services Contracts (PSCs).

Great British Railways will have a significant scope and will incorporate Network Rail, which is a significant operation in itself. The new body will need to ensure that it doesn't just internalise the complexity that currently exists and embed barriers to change, but actively ensure that they're eliminated as the new structure is designed.

It's been proposed that the PSCs will be based on a concession model, where revenue risk is retained by the contracting authority. This will enable more flexibility for Great British Railways to reform and then evolve fares and ticketing.

It's also recognised that a toolkit of incentives and levers will be available. This includes incentives to drive revenue growth and, where appropriate, have revenue sharing arrangements.

It will be important to ensure flexibility exists in the PSCs to enable Great British Railways to deliver on its mandate and for passengers. As such, consideration could be given to:

  • collaboratively developed annual business plans for the Great British Railways changing requirements
  • incorporating incentives that can be flexed in-life to ensure priority areas are focused upon
  • having flexibility to deliver specific programmes, such as major infrastructure delivery support.

The future plan for rail

For the Williams-Shapps Plan for Rail to be successful, the ability of Great British Railways to drive change through an agile system will be essential to respond to:

  • changing government priorities
  • the changing needs of passengers and freight users
  • the need to drive innovation and cost efficiency.

The wide-ranging scope of Great British Railways will help in achieving this, but it must remain agile in itself and through its regional structure, and have flexible contracts with its private sector train operator partners.

For more information about the future of rail, visit our infrastructure finance page.

To discuss further, get in touch with Jason Hurst or Andy Boak.

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