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Now the boiling frogs are invading the TOCs
After more than two years of negotiations the Strategic Rail Authority announced on 11 July that it had at last signed the promised three year franchise replacement deal for SWT with incumbent Stagecoach Group. The new franchise will run from 1 February 2004 to 4 February 2007 , with the option of a five year extension for good behaviour.
For once, the SRA gave an indication of the subsidy profile without me badgering the press office. It said that support for the franchise will be approximately £165-170m per year. Profit and revenue sharing is also part of the deal.
But before we come to that let's have a graph of the actual subsidy profile.
One of the problems in evaluating replacement franchise subsidy profiles is the fact that the allocation of track access charges (TAC) changed with the start of the Rail Regulator's second control period (CP2) on 1 April 2001 . To get the original franchises off the ground, a Track Access Charge was developed for each TOC. It was a pretty crude process, effectively spreading Railtrack's costs evenly across the 25 franchises.
Second time around there were complicating factors. First, the Regulator increased the TAC but the SRA didn't want all the increase to go into TOC costs so a proportion was to be paid as a direct grant . Second, instead of jam-spreading the total as before, each TOC's payment was related to enhancement expenditure on a route basis. Thus some individual TACs went up and some went down.
As a result, SWT's subsidy fell to £33million in 2001/02. Of course, this is the gross figure and since SWT are the naughtiest boys on the block, the net figure was less £12.8m in incentive penalties. For 2002/03 the figures were £36m gross/£24million net.
Our chart shows gross figures and you can see that after a jump to just over £192m in the current year, to cover the extension of the original franchise and considerable capital costs, the total subsidy is £165m for the first two years of the replacement franchise and £170million in the final year.
So, taking £165million as the new figure, we see that the replacement franchise is costing just under 4.5 times – that's 4 decimal 5 - what SWT cost the taxpayer in 2002/03. Put it another way, the three year franchise replacement will cost £500million.
So where will all the extra money – say £130million a year - go? Mostly on the Desiro electric multiple unit fleet.
According to informed sources, compared with the slam door vehicles being replaced, the Desiros will cost an additional £55 million a year. Then the power hungry lard butts need more amps and someone has to pay my chums at Network Rail to put in all those new sub-stations, which translates into a further £33million a year on SWT's TAC.
So that's £88million. And once you have allowed for increased staff and rising pension costs, plus a doubling of the Performance Bond to £44 million, which has to be paid for, it is not that difficult for SWT to get through another £40million a year.
As foreshadowed in the SRA's franchise replacement policy document the franchise includes what are generically called profit sharing schemes. Here we see a practical demonstration of SRA's commitment to cutting costs and controlling capacity. If SWT earns more revenue than forecast in the bid, the SRA takes 87.5%. On the other hand, cost savings are shared 50/50.
So expect a cost cutting purge on SWT in the next three years. And I must find out how this arrangement encourages better revenue protection – costs up, revenue up even more.
With new trains eating up the subsidy, plus its three year term, the new franchise does not include some of the much vaunted elements in Stagecoach's original 20-year franchise plan. Dropped are the extension of suburban trains to 10 cars and major remodelling of Clapham Junction and Waterloo stations. And, as you read here first and thought it was an April Fool, the growth build of 32 five car Desiro 450s look likely to be redeployed on the West Coast Main Line.
But all is not lost. There will be funding for ‘some' platforms to be extended to meet HSE requirements under the Mk 1 stock replacement programme.
What you get for half a billion*Continued implementation of a detailed performance plan to improve punctuality and reliability. *Delivery into service of Desiro EMUs over the next two years to replace 576 slam door carriages. *Financing of the upgraded depots necessary for the new trains, including the new Northam Depot. *Continued investment in CCTV at stations, an improved train cleaning regime and an accelerated station repainting programme. *Overhaul and refurbishment of Class 455 inner suburban EMUs to improve reliability and passenger comfort. *Continuation of service improvements - some longer peak hour trains and improved Sunday and late night frequencies. These were introduced following the SRA's extension of the original SWT franchise, due to expire in February this year to February 2004. |
In their press release, Stagecoach emphasised that the new franchise places responsibility for funding and delivering infrastructure projects with the SRA, ‘leaving SWT to focus on delivering a better train service to passengers'. In addition to Mk 1 replacement and Class 455 fleet refurbishment, a £6m programme of fleet reliability improvements is planned.
And, now that the deal is signed, the introduction of new automatic ticket machines will also go ahead. Options in the agreement also include work to improve passenger circulation at Waterloo Station and a recast of the Windsor line services to provide more track capacity for additional peak services.
Ooops, I nearly forgot. I'm sure you are all wondering what the mystery red line on the subsidy profile chart represents. Well that is the total subsidy, in 2003/04 money, which Network SouthEast received in the financial year 1990/91. That's Network SouthEast as in every suburban service reading clockwise from South Eastern round to London Tilbury & Southend.