An InterCity 125 train at Doncaster operated by East Coast Trains. East Coast is run by Directly Operated Railways but the Government is trying to re-franchise it before the general election to prevent a possible Labour government reversing rail privatisation

The Labour party’s emerging policy on railway franchising has been criticised as the “worst of all worlds”.

It has been badly received by all sides of the industry, said Professor Paul Salveson of Huddersfield University.

Criticism has come from RMT, the rail workers’ union, as well as ATOC, the association that looks after the interests of the franchised train operating companies.

Professor Salveson added: “If Labour wants to make a real difference, the solution is simple – abolish franchising and either take each franchise back into public ownership as they come up for renewal (but keeping existing business structures) or, in the case of regional franchises like Northern, hand them over to not-for-profit bodies based on employee and passenger ownership with franchising done by bodies such as Rail North.

“That way you get local accountability, profits earned go back into the business, and passengers as well as employees are genuinely empowered.”

He said there are repeated reports that the Labour party is about to announce its “new policy” on rail which will include allowing the Government-owned Directly Operated Railways the freedom to bid for franchises.

"On close examination it is not a good idea. There are big potential conflicts of interest in allowing the state to bid for franchises from…the state. If you are going to have a system based on franchising, you need a very clear separation between the franchising body and the franchise bidder. Having effectively the same organisation putting in bids raises lots of concerns about impartiality and could well deter outside bidders."

If DOR is allowed to bid for franchises, Professor Salveson said it will be expensive. A typical bid costs £5 million, whether the bidder wins or loses. So if DOR – currently a very small organisation – wanted to bid for Northern it would need to have a budget of £5 million which could only come from the Government. If DOR lost its bid, it would be £5 million of public money squandered.

Professor Salveson added: “Somehow I can’t see the Treasury mandarins being so happy with this, and maybe Shadow Chancellor Ed Balls needs to wake up and realise the implications of his ‘non-ideological’ approach."

More information: Salvo 149