Rosco enquiry criticises franchising

10 August 2008

Last year the Department for Transport triggered an enquiry to look into over-charging (the government suggested a figure of around £177million) by the firms who lease rolling stock to rail franchises (ROSCOs). To the government’s alarm, the Competition Commission blamed the problems on the government’s franchising methods.

 

The Commission says that train operators had a ‘very limited number of rolling stock options available’ when bidding for franchises, and that this automatically restricts competition. It blamed a ‘shortage of vehicles available for lease at the point franchises are being let, technical and operational factors... and costs and risks in switching or introducing new rolling stock’.

 

Contrary to what the government intended when it referred ROSCO profits to the Commission, the report did not blame the rolling stock providers – mainly Angel Trains, Porterbrook and HSBC Rail. These three have invested more than £6bn since privatisation and Diana Guy who chaired the commission explained, ‘We have found that there is active rivalry between ROSCOs for the leasing of new rolling stock at its first lease.’

 

However, due to the way that the DfT micro-manage franchise bids there was frequently ‘little or no competition to the existing incumbent fleet’. This was due to ‘detailed specification’, the department's refusal to allow operators to buy new trains on cost grounds and the fact that franchises were too short ‘and not awarded simultaneously’. .

 

Keith Norman says the report demonstrates the ‘bizarre and inadequate’ franchising systems. ‘At least when the railways were nationalised British Rail could make operational and engineering decisions based on their knowledge and expertise,’ he said. ‘Now a technical rail decision is just as likely to be made by an accountant!’

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