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Open access on inter-city routes is commercially viable, MPs told

Allowing open access operators to run on inter-city routes would improve services, the managing director of Grand Central told the Transport Select Committee yesterday.

In an appearance as part of the committee’s inquiry into rail franchising, Richard McLean said: “We’re not allowed to be active in the main markets. However, even with our small scale, we’ve shown that, having taken a big risk starting the business, we can become operationally and commercially viable and deliver a good customer service over time.”

He added that an alternative model of development on how inter-city services are operated “could allow open access services to operate on those core inter-city flows”.

McLean said open access services would reach communities that conventional rail franchises did not serve, encourage competition and consequently improve services, and potentially attract passengers away from air and coach travel.

However, he said that a system, such as a levy on track access charges, would be needed so that the government would be compensated for the loss of its premium on franchises.

Arrangements for open access operation would also need to be made simple to avoid creating “a new bureaucracy”, McLean added.

He said he thought the DfT was “open-minded to alternative approaches”, but added: “Because we have to be careful, this is a large industry, it has a huge economic impact on the country as a whole, it’s not something to fiddle around with without due care and consideration. We have to think about the impact on customers in particular.”

Elizabeth de Jong, director of policy at the Rail Delivery Group, who also appeared before the committee, said that greater open access would need a new rail funding system.

“For the taxpayer, for businesses and for open access operators themselves to survive there would need to be a change in the mechanisms, the charges around operating the trains,” she said.

She added that the DfT is due to carry out a consultation on the possibility of a levy on open access operators in December.

Decline in competition for franchises is ‘concern’

De Jong also said the current system for bidding for franchises was discouraging TOCs from getting involved, reducing competition.

“It is of concern to many of us involved that there has been a decline in bidders for recent competitions,” she said.

In June, MTR Corporation West Midlands withdrew its bid for the West Midlands franchise, leaving London Midland and West Midlands Trains as the only companies in competition.

MTR is also partnering with FirstGroup to bid against Stagecoach for the South Western franchise, meaning that just two companies are bidding for two of the biggest franchises.

De Jong suggested that reasons for the lack of competition could include a change in the “risk and reward profile” for franchises as they got larger, increased costs which mean company owners have to spend up to £200m in risk capital, and changes to the mechanisms that protect operators from risk.

For example, she said Arriva and First Group didn’t have “any support at all” in avoiding risk when they took over the Northern and TransPennine franchises.

Gareth Powell, director of strategy and contracted services for surface transport at Transport for London (TfL), said that TfL wanted to see more rail devolution to deliver “a greater number of smaller, more focused franchises”. TfL board papers published last month revealed that it has targeted four suburban rail services to absorb.

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