From: Denis Fryer
Date: 10 October 2010

Rail Franchise Policy Team
Department for Transport

RESPONSE TO THE DFT’S CONSULTATION ON ‘REFORMING RAIL FRANCHISING’ FROM THE SOUTH HAMPSHIRE RAIL USERS’ GROUP

I attach a response to your July 2010 Consultation on behalf of the South Hampshire Rail Users’ Group, along with a background paper on South West Trains, which helps illustrate the many ways that a franchise can go wrong.

These are based on a substantial volume of documentary evidence, and were circulated to local stakeholders at draft stage, with their comments taken into account.

The background paper [See Appendix], in particular, draws on the statements of Ministers, other MPs, regulatory bodies, and rail users.

Our thanks are due for the opportunities to comment, and to attend the presentation on 30 September which was very helpful.

Denis Fryer
Co-ordinator

Introduction

This Group was founded 17 years ago to promote the interests of rail passengers in Southern Hampshire through information gathering, sharing, analysis and dissemination, and putting forward constructive suggestions. We now operate principally by e-mail, and are accessible through our own website (www.shrug.info), the Campaign for Better Transport’s website, and Hampshire County Council’s e.VOLve website.

Substantial reports on franchising were published by the Transport, Local Government and the Regions Committee in 2002, and by the Transport Committee in 2006. The contents of those reports raised serious concerns, and include much that would be relevant to your current exercise. Our small contributions were published in the 2002 Committee Report as Appendix PRF12, and in the 2006 report as Appendix 1. The fact that franchising needs to be reviewed every four years inevitably raises questions about whether the process can ever be optimised.

GENERAL RESPONSE

What drives improvements?

1.1 The consultation states: “We believe that one of the main reasons for involving the private sector in provision of public services is to harness its expertise and innovation to improve the way services are provided and respond flexibly to user demands”.

1.2 This very much reflects what Dr Brian Mawhinney said in a DETR leaflet as long ago as January 1995: “We want responsiveness to passengers’ wishes. We want, in the railways, all the characteristics of the best of British industry. The Sainsburys of this world respond rather well to their customers’ changing demands without any help from the state, thank you very much. We want that responsiveness for the railway too”.

1.3 However, the reference to Sainsburys suggests that Dr Mawhinney thought competition would drive improvements on the railways. The Sainsburys of this world are indeed driven by competition and fail if they don’t give the public what it wants. Very few rail services compete with one another, and competing bus or coach services are in many cases run by the same parent company as the trains.

1.4 Dr Vincent Cable recently said that “Capitalism takes no prisoners and kills competition where it can”. A South West Trains (SWT) magazine once referred to Brian Souter, founder of the parent company Stagecoach, as “The tough Scots bruiser who came to dominate the UK’s bus industry by ruthlessly driving rivals off the road”.

1.5 On South West Trains, Stagecoach thwarted Anglia’s proposals for new services between Southampton and Norwich by temporarily changing its timetables to remove spare track capacity south of Basingstoke. It has also made two totally unrealistic bids for franchise renewals in order to see off its rivals, followed by a big investment in PR and the stripping of assets once paid for by taxpayers.

1.6 The Coalition regards longer franchises and a freer hand for railway professionals as drivers of improvements. This is probably far too sanguine. The longest current franchise (Chiltern) has proved one of the most successful, but the big improvements it introduced have to a large extent been funded by taxpayers through Network Rail. At the other end of the scale, in 2001 Stagecoach was chosen as preferred bidder for a 20-year franchise on SWT but, remarkably, this was reduced to 3 years because of the company’s poor performance and financial weakness.

1.7 The background paper submitted with this response, provides an anatomy of SWT which, despite years of appalling performance, has remained in the hands of a single operator longer than any other. Compared with BR days, its services are slower and in some cases less frequent, its long-distance rolling stock less comfortable, its travel centres destroyed, its stations less often staffed, and its passengers subject to bullying over minor infringements of spurious rules. All this appears diametrically opposed to your own aspirations for passengers. It is clear, in the case of South West Trains, that Stagecoach has been able to do what it likes because there is no competition on the routes out of Waterloo.

1.8 We are always told that past performance is given heavy weighting at the pre-qualification stage of the bidding process. The history of SWT suggests otherwise. It is one long story of letting down passengers and squeezing more money from taxpayers. Governments and Ministers come and go. Civil servants move on. Their memories and experience may be limited. Transport companies are generally permanent fixtures, and this can give them a significant bargaining advantage over those representing passengers’ and taxpayers’ interests.

1.9 The people who do have long memories are commuters, whose quality of life can be significantly affected by the delivery of rail services. The report ‘Rail Passenger Franchise Replacement’, published by the Central Rail Users Consultative Committee (predecessor of the Rail Passengers Council, and latterly PassengerFocus) in January 2000 stated: “The Deputy Prime Minister, in a meeting with CRUCC representatives in August 1999, said that he wanted to see the passenger representative network heavily involved in the process of franchise re-letting. Support, or otherwise, for particular bids would be crucial. He stated he wanted to see the CRUCC network involved in the running of passenger forums and hearings which might be held to consider bids”.

1.10 This demonstrated the government’s recognition that passengers’ voices could add significant value to the re-franchising process, but was never implemented. Significantly, in SWT’s on-line poll in 2006, only 30% of respondents thought Stagecoach should have kept the franchise. Instead of greater involvement in the franchise process, passengers had their voices muted by the abolition of the regional Rail Passengers’ Committees (formerly the Rail Users Consultative Committees), which used to feed information to the central Rail Passengers Council. It seems fair to say that the importance of local input was one of the major themes of the stakeholder meeting on 30 September.

1.11 Turning to reliance on railway professionalism, this can exist at various levels. All train operators should have ‘professionals’ for activities such as timetabling and customer service. But do the people at the top strive to create an atmosphere in which professionalism can thrive?

1.12 The underlying problem with the SWT franchise is that it went to an operator which couldn’t be described as professional in any sense. Stagecoach founder Brian Souter had had only a glancing contact with the rail industry. In addition, his company didn’t fit the dictionary definition of professional as “characterized by or conforming to the technical or ethical standards of a profession”. Indeed, he once told Scotland on Sunday that, “ethics are not irrelevant, but some are incompatible with what we have to do because capitalism is based on greed”.

1.13 Stagecoach seems to be driven by the question “How much can we take and how little need we give?” It was not alone in undermining the rail industry’s reputation (for example, there was systematic neglect on the Connex franchises), but it probably played the prime role.

1.14 It is over a decade since Steven Norris lamented that “if we had tried to dress privatisation in its most acceptable form, it would have been better to award it [the SWT franchise] to almost anyone else”. It is likely that it is precisely because of the unprofessional behaviour of such companies as Stagecoach that previous governments have not given a freer hand to rail operators. Instead, private sector shortcomings and failures gave rise to a perceived need for an authority to provide leadership across the fragmented rail industry.

1.15 The Strategic Rail Authority (SRA) could have played an invaluable role in encouraging best practice. But the chairmanship (and chief executive role) eventually went to Richard Bowker who had business and family links with Stagecoach. His largesse, at taxpayers’ expense, included £29m to bail out SWT when Stagecoach came close to financial collapse. He then awarded a hugely lucrative 3-year SWT franchise so that the company could put right its infamous performance.

1.16 The Transport Committee noted that “The SRA failed to provide the industry with the leadership that was expected of it”. Mr Bowker, apparently aware of his mistakes, commented, “There has been a lack of clarity over what is required of franchisees. We have been saying, ‘here’s a minimum level of service, now go for it’. Instead, we will be saying, ‘this is exactly what we want you to do’.”

1.17 So who now welcomes a freer hand for operators? Stagecoach chief executive Brian Souter for one, as in this recent article from RAIL:

“Souter believes improvements must be made to the existing rail franchising model, however, to give operators greater freedom to invest in improving services for passengers, reduce the burden on taxpayers, cut unnecessary micro-management by government and better protect services in challenging economic times.

The emphasis should be on high levels of customer satisfaction, said Souter, with each train operator free to determine the best way of achieving that objective. “All of this can be achieved while ensuring a sensible risk transfer to the private sector, which allows for shareholder returns commensurate with performance and capital put at risk”, he said.”

1.18 This seems not a little incongruous, given that Stagecoach has just wrested additional funding for SWT, at an estimated £70m-£100m unbudgeted cost to taxpayers, and is now reportedly cash-rich with £340m available for acquisitions.

Process or people?

1.19 Despite its recognition of the importance of professionalism, the consultation focuses more on process than on getting the right people in charge of the railways.

1.20 The privatisation model was originally offered as a route from the perceived failings of BR. BR did suffer from periods of lethargy, and of Treasury under-investment, but it delivered a tightly-scheduled nationwide network of connecting services, employed a readily understandable fares formula, and treated its passengers proportionately. Today, punctuality tables are chased by slowing schedules and ignoring connections. Fares are bewilderingly complex, with passengers facing the social injustice of hugely varying charges over similar distances, in what is supposed still to be a public service; and huge fines may be imposed for falling foul of spurious ticketing rules.

1.21 This is not to say that private train operators haven’t introduced improvements. For example, GNER set standards of customer care which were so good that the Yorkshire Post conducted a popular campaign for the company to be awarded a second franchise term; Cross Country is about to introduce the most frequent service ever between southern Hampshire and the North of England; and Southern has introduced Flexible Daysave tickets which enable longer-distance commuters who work part-time to travel at costs broadly pro-rata to annual season ticket rates.

1.22 However, it’s doubtful whether these gains can be attributed to the franchise process. Under good leadership, BR also could shine. When Sir Bob Reid (the first of the two chairmen of the same name) took charge, he demonstrated the public service ethos at its best, anecdotally answering questions with the further question “What’s best for the passenger?”

1.23 Former Conservative transport minister, Sir David Mitchell, warmly commended Sir Bob for transforming BR, which he considered a run-down system with low morale in the early 1980s. He records that, for 1984-87, he had tasked BR with running attractive, punctual services with 25% less subsidy. The saving on subsidy actually rose to some 27%. Twenty-four major projects were successfully achieved, including well over 1,000 miles of electrification, over 2,000 new passenger vehicles, over 190 new locomotives, and new signalling. BR was running more trains at 100mph or above than any railway anywhere in the world, except France.

1.24 Nowadays, such commendable performance is out of reach. There is an obvious tension between passenger/taxpayer interests and shareholder interests. The 2000 CRUCC report stated: “At the heart of any private provision of a public service is the perceived inherent tension between shareholder interest and user expectations”. This is very apparent on SWT, where the two Stagecoach founders are major shareholders, and shareholder interest equates in considerable measure with their self-interest.

1.25 The rail industry is highly complex. Whether there are now enough professionals to lead all its disconnected components is open to question. Franchise managers often have a background of road transport or even accountancy.

1.26 Some operators try to find out what their passengers need and some don’t. For example, Southern has a 2,000-strong on-line passenger forum. Great Western has a network of local passenger representatives. SWT has only a small and ineffective Passengers Panel which is severely constrained in the scope of its discussions; its response to issues raised in its half-yearly “Webchat” events is minimal; and it recently offered PassengerFocus and rail user groups an insulting 10-minute slot when they asked for a meeting.

Green issues

1.27 Green issues interface with another tension in the railways, that of priorities between long-distance and local services. Getting passengers out of planes and into trains can achieve worthwhile reductions in greenhouse gases. And fast, long-distance trains can be icons of economic energy.

1.28 At the same time, road traffic brings pollution to people’s doorsteps, and is likely to be a prime driver of ill-health and shorter life expectancy in urban areas. Apart from the human cost, this inevitably implies an additional financial burden for the NHS. So the balance needs to be right.

1.29 Interestingly, whenever there is a media outcry about increased fares, the Association of Train Operating Companies produces a line about the average rail fare being not much over £5. So local travel is clearly important. The railways are both a national network and provider for a huge range of local passenger flows. This is why local input is so important if passengers’ needs are to be met and the railways operated as effectively as possible.

1.30 Getting the right balance between types of service will depend on the type of franchise. It can generally be maintained within the Great Western franchise. In many cases, though, it needs to be maintained between a commuter/regional franchise and inter-city franchise running trains on a common route. This should be taken into account in the specifications for both the franchises, and implies the need for a requirement that the franchisees should co-operate.

FRANCHISE SPECIFICATION

Level of specification

2.1 The proposal for a base specification is essential and should reflect latent demand as well as footfall. When Chris Green set up Network South East, he used a rule of thumb that the base standard-hour service should be hourly for villages, and twice-hourly for towns. This had the advantage that stations where demand was being constrained by poor service saw improvements. There should also be a requirement for services to be as evenly spaced as possible.

2.2 Some freedom in timetabling is clearly desirable. It makes no sense to lock passengers into a timetable for 15 years, or even for five years or so between reviews. BR kept timetables under regular review. When infrastructure was upgraded, journey times were generally reduced. At other times timetables were adjusted to improve connections or provide more through services. During economic downturns, some local trains were cut and compensatory stops introduced in longer-distance services (easier to do this today as there is so much slack in schedules). Such changes can enhance or maintain value for money.

2.3 Reduction of service levels should never be undertaken lightly. The green agenda is important, but how can people be expected to increase their reliance on public transport services which may suddenly disappear? One press item about a handful of disadvantaged passengers at a single station can put people off rail travel across Britain.

2.4 There has been a general population drift in recent years from the big cities to smaller towns or villages. So concentrating services at a few big stations, as often seems to happen, is likely to be counter-responsive to people’s needs and generate additional car journeys.

2.5 It needs also to be borne in mind that statistics on train usage are notoriously unreliable. An extreme example is Dorchester West station on the Weymouth-Bristol line. This station is accredited with 416 passengers a year (just over one per day) in the March 2010 Great Western Route Utilisation Strategy. However, it is not unusual to see passengers in double figures joining and alighting from individual trains. Some of these are making journeys which involve transfer between the town’s two stations.

2.6 Given that the railways are a public service, the public should have a voice in timetable development. Train operators should be required to maintain an open door policy towards County Councils and transport authorities and, either through them or directly, with district and town councils and rail users. Great Western is an example of a train operator that has worked closely with stakeholders on improving service patterns. This would seem to fit well with the Coalition’s ‘big society’ agenda. DfT could discuss outcomes with County Councils before periodic reviews with operators.

2.7 Franchises of any length require corrective mechanisms to avoid passengers suffering from contracted blunders. A FOI request by our Group established that, when DfT consulted on what is the current timetable between Waterloo, Poole and Weymouth, there was some mismatch between the required stopping patterns and journey times. In addition, the proposed omission of stops at Totton and Ashurst from the Waterloo-Weymouth semi-fast trains was withheld in the consultative process.

2.8 Totton is not a high-profile town but, with a population of 30,000, it is the fourth largest between Southampton and Weymouth and much larger, for example, than any town or city in Cornwall. The parallel road between Totton and Southampton is one of most congested and polluted in Hampshire. It carries traffic between Southampton city centre and the M27, and serves the Western Docks, two container terminals and the city’s biggest industrial estate including a refuse depot.

2.9 Totton’s standard-hour service was reduced from five departures in 2003 to two. Journey times from Waterloo were increased by 25 minutes, and westbound trains gained a layover of 25 minutes at the small village of Brockenhurst. Shoulder peak services were axed, with an 86 minute gap in afternoon westbound services from Totton to the next town down the line (Christchurch). At the same time, the small towns of Dorchester and Wareham, in rural Dorset, gained half-hourly London services.

2.10 Jim Richards of DfT seemed genuinely concerned about the outcome at Totton. However, when two members of our Group met him in Marsham Street towards the end of 2006, the SWT representative was totally intransigent. Yet the current standard-hour Waterloo-Weymouth semi-fast service and Waterloo-Poole stopping service are significantly different from the DfT’s Service Level Commitment.

Length of franchise

2.11 As above, it is far from clear whether longer franchises will lead to greater passenger benefits. However, they should lead to some savings in administrative costs which, theoretically, could help boost investment levels. The interests of passengers/taxpayers could be promoted by giving preference to joint-venture bidders, on the basis that they are likely to offer both wider expertise and greater financial stability.

2.12 Having two or more parent companies could help promote responsible attitudes, because operators are likely to be circumspect when choosing bid partners. Franchises run by Serco/Abellio, First/Keolis and Go-Ahead/Keolis have generally avoided the worst problems encountered by the franchises spread among single operators, principally Britain’s five major bus and coach companies. SWT originally ran into serious financial trouble, with a heavy cost to taxpayers, not because of unavoidable external risks but because the parent company was weakened by Brian Souter’s ill-judged expansion in the US.

2.13 The length of franchises should at least reflect the amount of committed investment. Joint ventures between two or more parent companies may be able to offer higher levels of investment. Such arrangements may become easier as mainland European companies enter the franchise market.

Affordability figure

2.14 An initial affordability figure is an excellent idea. In the first re-franchising round on SWT, Stagecoach tried to gain public support by offering a range of improvements which was never going to be affordable. In the second round, it massively outbid its competitors, ruthlessly stripped assets, and was looking for big taxpayer handouts less than four years later.

Tweaking franchise maps to improve value

2.15 Capacity might be improved by some tweaking on the fringes of franchises. For example, the transfer of SWT’s diesel services to Great Western would enable carriages used on Waterloo peak trains to ease overcrowding on regional and local services at weekends (for example, big sporting fixtures at Cardiff in winter and West of England holiday traffic in summer).

2.16 Another tweak would be to transfer SWT’s Southampton-Portsmouth hourly stopping service to Southern. This is almost exclusively operated by three units which spend one third of their operating hours idle. Southampton-Portsmouth is the South’s most populous corridor outside Greater London, yet it has one of the worst inter-urban services in Britain. The SWT service and Great Western’s Cardiff service arrive and depart at Portsmouth a few minutes apart in each hour. An issue here is that Southern is the major operator on the Southampton- Fareham leg of the journey. With transfer of the SWT services to Southern, there would be an opportunity to run Southampton-Portsmouth as part of Southern’s Coastway West service, perhaps with integrated train diagrams and better service patterns.

Restructuring fares

2.17 Fresh thinking is needed on fares. First class has little relevance on short-distance services, especially where there is a seat priority system as on Southern. Capacity could in many cases be increased by having standard class only. On SWT, increase of the first class surcharge from 50% to 80% has in any case flattened demand.

2.18 There should be some central guidelines on fare structures, in addition to regulated fares. The farcical situation whereby a couple paid £12 for two Megatrain tickets, and were then fined £114 for deciding to alight five miles short of their destination, should have no place in a public service. Peak and off-peak periods should have a universal definition. Zonal fares, travel cards, ranger tickets such as the Southern Daysave and, eventually, smartcards, make a lot of sense because people are treated similarly over large areas.

FRANCHISE PROCUREMENT AND MANAGEMENT

What are the benefits and downsides to the procurement process outlined in the document?

3.1 In principle, the process is reasonable and the increased emphasis on qualitative values is welcome. However, it will achieve passenger benefits only in the hands of ethical operators. The less prescriptive the franchise specification, the greater the rigour needed at the pre-qualification stage to weed out unethical or unreliable bidders. There are, incidentally, considerable volumes of information on national and local newspaper websites about the quality of service which passengers get from train operators.

3.2 By way of example of the dangers, the DfT’s 2006 press release on the award of the third SWT franchise “expected” that season tickets for journeys avoiding the high peaks would be reduced. Stagecoach instead introduced a 20% surcharge on off-peak morning day returns to London.

How can we reduce the complexity of bidding, while still protecting taxpayers and passengers (especially given a greater focus on quality)?

3.3 These objectives don’t appear compatible. The greater the operational freedom within a franchise, the greater the need for minute examination of operators’ past histories and intentions.

CONTRACT DESIGN AND MANAGEMENT

What services, outcomes and commitments should be contracted?

4.1 The following seem highly pertinent:

* The provision of specified train service levels, and maintenance of a dialogue with County Councils (and through them, or directly, other local authorities and rail users) to ensure that viable opportunities for service improvements are taken forward, where necessary liaising with operators of adjacent franchises.

* The use of suitable rolling stock according to service type (for example, no suburban stock on long-distance routes).

* The maintenance of facilities and rolling stock to high standards, and no asset stripping (for example, destruction of travel centres).

* Passengers to be treated fairly and proportionately [Chris Huhne called for this to be included in franchise requirements. See Southern Daily Echo 23.6.2007]

* Commitments on affordable fare structures and fare levels.

* Punctuality and reliability, with greater focus on connections.

* Maximum length of time passengers need to stand.

[The consultation suggests targets on ticketless travel but this is to a large extent dependent on operator failure to make payment easy, for example through well-staffed ticket offices, permit to travel machines and conductor guards. The recent survey by PassengerFocus has confirmed that ticket machines can present real problems for passengers.]

What is the best way to structure outcome measures based around passenger satisfaction levels?

4.2 A weakness of the previous administration was that it seemed to prefer figures to the facts behind them. This is reflected in the work of PassengerFocus compared with that of the former regional Rail Users Consultative Committees / Rail Passengers Committees. The headline figures for overall satisfaction in the National Passenger Surveys get the media attention and SWT, for example, produces seemingly huge quantities of its UPDATE leaflet proclaiming that its passengers are ‘highly satisfied’. In fact, the latest 85% satisfaction rate applied to SWT’s 400,000 daily passengers, shows that around 20 million passenger journeys a year on SWT give rise to dissatisfaction.

4.3 The proposed move towards a more qualitative approach is welcome. Mystery shopper exercises are a good idea, but they will be of little use unless conducted independently of the operators. There were limited trials of an independent scheme in 2000, and the National Audit Office wanted roll-out across Britain. Another useful activity was the site visits which used to be made by members of the Rail Users Consultative Committees / Rail Passengers Committees.

4.4 One point which PassengerFocus sometimes raises is that global punctuality and satisfaction statistics can mask wide variations across a franchise (the huge dissatisfaction with rolling stock on the Waterloo-Portsmouth line is an example). National Passenger Surveys and Mystery shoppers should be geared to produce a more detailed local picture, especially as so much rail travel is relatively local.

4.5 Another good point from PassengerFocus is that slack scheduling can mean trains run late and miss connections but are recorded as punctual because they reach their final destinations on time. There is a related point that trains may not wait for connections where they could easily do so and still be recorded as punctual at the end of their journeys.

4.6 Connections vastly increase the range of journeys for which rail can provide, and are therefore a commercial proposition. Operators such as SWT refuse to hold connecting services beyond 30 seconds before their departure time on the grounds that passengers value punctuality above all else. Yet a principal reason for valuing punctuality is the need to make connections. When Cross Country trains from Bournemouth are delayed, anxious passengers with connections at Birmingham New Street jam the corridors after departure from Birmingham International.

4.7 In addition, missed connections are likely to be one of the reasons why passengers prefer direct services. The latter flourished in Bob Reid’s sectorised railway, but are now in decline. Bournemouth-Plymouth, for example, can be hugely complicated unless passengers use the circuitous route via Reading; until recently, there was a direct daily service from south Hampshire to Penzance. Surveys and mystery shoppers need to gather information on missed connections, and bidders might be scored for positive attitudes to introducing direct services and maintaining good connections. In many cases, direct services could be realised economically through dual-portion trains.

4.8 The findings of the surveys and exercises could be used to set targets for improvements against the output measures listed above. As to who might do the mystery shopping, PassengerFocus could recruit volunteers, such as retired people with substantial experience of rail travel, on an ‘expenses only’ basis. This would again be something that would fit the ‘big society’ concept well.

4.9 Turning to capacity, no passenger should have to stand, given that Britain has, in many cases, the highest fares in Europe, but this is probably unrealistic in the major commuting areas. The well-established 20-minute rule seems reasonable, as this is probably close to the kind of maximum journey times for which passengers may be forced to stand on Tubes and buses.

What sanctions should be used to ensure operators deliver their commitments, including outcome measures?

4.10 The obvious sanction would be a requirement to make the necessary investment to achieve satisfactory outputs within a prescribed timescale. Persistent and serious failure should lead to formal action that could lead to removal of a franchise, as now.

REVENUE RISK

5.1 Leaving revenue risk entirely with the operator simply means that investment (if any) will dry up in difficult economic times and there will be strong incentives to look for cuts across all areas of operation. So a degree of risk sharing looks essential.

5.2 Profit sharing also looks essential. Parts of the railway industry are as hooked on the big bonus culture as the banks. After Stagecoach’s generous second franchise settlement on SWT, the two founders reportedly shared dividends of £65m in 2004 and £175m in 2006. Former Stagecoach director Mike Kinski reportedly received a £250,000 welcome bonus in 1998, and a £1,400,000 farewell bonus in 2000.

FRANCHISE INVESTMENT

How can we add to incentive from longer franchises to remove the barriers to private sector investment?

6.1 The problem is that the private sector can choose to use its profits to invest in any perceived profit-making opportunity, which may have nothing to do with the railway. When Stagecoach took over SWT it profited from employing too few staff and systematic neglect of its passengers. It then embarked on a round of overseas expansion, lost its money in the US, and got a £29m bailout from taxpayers.

6.2 Some railway features mitigate against profit. A point made at the meeting on 30 September was that the stations not run by Network Rail might be leased to train operators. Operators of the bigger leased stations could profit from rents on retail outlets, but custom will be very constrained where these are behind ticket barriers. A small customer base is presumably reflected in low rentals, though SWT allegedly imposed a 140% increase in rent on the coffee shop at Godalming,

6.3 Conversely, the concourses at the major stations run by Network Rail are open to the general public. The retail outlets attract passengers, people meeting or seeing off passengers, and others for whom the outlets are conveniently located. Presumably Network Rail profits handsomely from the rental for such outlets.

6.4 Lord Adonis noted that he could not get a coffee at Southampton Central at 20.00, but could refresh himself at Brighton 2 hours later. Does this not in large measure reflect the fact that the food outlets are behind the barriers at Southampton but have public access at Brighton?

How can we encourage investments with long payback periods throughout the franchise term, not just at the start?

6.5 You probably can’t. Even if there is a mechanism for compensation from future franchisees, it is likely that the original operator will prefer more profitable activities outside the franchise, and replacement operators will want more subsidy or less premium in their agreements to reflect the compensation.

COST CONTROL AND EFFICIENCY

How can the government incentivise operators to control cost increases over the life of the franchise, and to improve cost efficiency?

7.1 Again, you probably can’t, especially after relaxing government controls. The experience of franchising to date is that passengers pay for cost increases through higher unregulated fares, higher car park charges, more restrictive ticket conditions, reduced staffing, and revenue protection excesses.

APPENDIX

SOUTH WEST TRAINS [SWT]

THE EXTRAORDINARY HISTORY OF A FRANCHISE WHICH
* IS CONTINUALLY ASKING FOR MORE
* IS CONTINUALLY STRIPPING ASSETS
* TREATS PEOPLE WITH CONTEMPT

SWT literature boasts that Brian Souter, the co-founder of its parent company Stagecoach is, “The tough Scots bruiser who came to dominate the UK’s bus industry by ruthlessly driving rivals off the road”. 1

Dr Vincent Cable, the Secretary of State for Business, Innovation and Skills, complains that “Capitalism takes no prisoners and kills competition where it can”.2

This paper demonstrates, through the voices and observations of many, including Ministers and other Members of Parliament, how an ethically-limited operator can continually take more from passengers and other taxpayers, give increasingly less in return, and dismiss its critics in terms which bear little relevance to the truth.

The first SWT franchise competition

1.1 Stagecoach won the SWT franchise by undercutting the incumbent management’s bid by just £200,000. This was the first rail franchise award, and the company was perceived as getting a particularly generous settlement of £350 million over 7 years.

1.2 Steven Norris, a Conservative Transport Minister, later admitted: “Awarding the franchise to Stagecoach was really taking the fight to the enemy… It was the most aggressive decision we could take, and if we had tried to dress privatisation in its most acceptable form, it would have been better to award it to almost anyone else.”3

1.3 Mr Norris’ comments seem well-founded. Mr Souter once told the Scotland on Sunday newspaper that, “ethics are not irrelevant but some are incompatible with what we have to do, because capitalism is based on greed.”4

1.4 The evidence inevitably suggests that this was a personal and destructive greed. Mr Souter and his co-founder Ann Gloag own a substantial shareholding in the company, and reports of their wealth have generally fluctuated between one and two thirds of a billion pounds. Yet Stagecoach first got out of the red by acquiring Hampshire Bus and then selling the less-profitable Southampton area bus operation, including disposal of the city’s bus station for commercial development. This brought them £4.4 million, twice the amount they had paid for the whole company.5

1.5 Bus stations are a well-appreciated feature of even Britain’s smallest towns, like Stornoway. Yet, as a testimony to Stagecoach greed, Southampton’s 215,000 residents, with 40,000 university students and a large Polish community, are today served by a disjointed range of bus services which have to depart from different points around the city centre to avoid congestion. Elderly and disabled people are often seen leaning against narrow plastic ‘perches’ in bus shelters.

1.6 On ethics generally, Stagecoach scores no better. They had driven out some established bus operators by running parallel services just ahead of the existing timetables. This practice assumed a high profile in the case of the Darlington Bus Company. In 1995, the Monopolies and Mergers Commission, after a number of confrontations, described Stagecoach’s behaviour as “deplorable, predatory and against the public interest”.6

1.7 In 1996, Stagecoach was effectively branded a cowboy company when, on public interest grounds, it was refused a High Court injunction against the World in Action’s programme ‘Cowboy Country’ which exposed its contemptible business practices to a wide audience.

1.8 Fifteen years on, the South East Scotland Transport Partnership, in response to the Competitions Commission’s inquiry into local bus operations, complains that Stagecoach has taken “fierce retaliatory measures” in Fife against smaller rivals. These include introducing improved timetables, and reverting to previous timetables once competitors pulled out.7

“Benefits” delivered by the first franchise

2.1 The Conservatives quickly came to realise their folly in franchising SWT to Stagecoach. The company sought to increase its profits by disposing of 125 middle managers and 71 drivers. It then had to cancel more than 190 services a week, causing uncertainty and anger among passengers.

2.2 Steven Norris lamented, ““We in the Conservative party were very happy at the way rail privatisation was going … new investment, new ideas, new services … SWT instantly unwound all that. It was so obviously a grave error of judgement, so obviously to the disadvantage of passengers, and so clearly an act committed by a private company. It left a bad taste instantly in people’s mouths about SWT.”8

2.3 Dr Alan Whitehead, subsequently elected MP for Southampton Test, commented: “We have the misfortune to live in the part of the country served by the worst single example of rail privatisation – South West Trains. Anybody who has travelled on the service recently will know that the whole system is in chaos, added to by South West Trains’ recent decision to scrap more than 190 of its services in a week. The problem arises through treating a public service as if it were just another marketing exercise.”9

2.4 John Watts, the Transport Minister called Stagecoach’s management ‘inept’, but the company was typically unchastened: “Souter poured petrol on the fire by suggesting that some of his customers had nothing better to do than to write letters of complaint in office time and wondered whether their bosses knew they were doing this. --- [Stagecoach Director Brian] Cox did not help by saying that ‘critics were fully paid-up members of the hindsight club’.”10

2.5 Dissatisfaction with SWT was rife, and it was never long out of the headlines: “A total of 28,000 complaints were lodged by passengers last year against the privatised South West Trains. That is more than 500 complaints a week and does not include the massive travel chaos in February and March this year after the company got rid of too many drivers to save cash and did not have enough left to run all the trains.” 11

2.6 Passengers were soon complaining of ‘cattle truck’ conditions on trains.12 The Waterloo-Portsmouth service was so poor that there were calls for Stagecoach to lose the franchise.13 Clamping at Basingstoke station became so aggressive that there were death threats against the clampers. One clamper was so brutal that, even after a woman with a disabled pass agreed to pay a fine for briefly stopping to set down her aunt, he left her stranded while he took a 2-hour break. The woman sued and received a settlement of £460.14

2.7 In 1998-99, SWT was hit with performance fines of £3.6 million. This was after void days had improved the statistics. The true number of delays and cancellations was 72,482, equivalent to one for every 6 minutes of operation.15 Managing Director Graham Eccles commented that ‘morale had never been lower’, and arrogantly washed his hands of any responsibility with the comment that “morale is how you feel about yourself and how others feel about themselves”. 16

2.8 Mr Eccles’ indifference was followed by industrial strife. By the start of 2000, SWT’s complaints staff were issuing much-delayed responses which referred to “literally hundreds of train cancellations caused by us having an unofficial industrial dispute with a large number of our train drivers.”

2.9 During the later years of the first franchise, SWT became increasingly hard-faced. It introduced a new policy of omitting booked stops to improve its infamous performance. John Denham, MP for Southampton Itchen, stated: “Like most people I was amazed to find that this happens. Whatever the reason, some passengers pay a high price for unreliability.”17

2.10 While passengers suffered, Stagecoach continued to prosper: “South West Trains, heavily criticised for its appalling service to commuters, today announced record operating profits of more than £39 million. --- The 16 per cent increase, up from £34.4 million last year, infuriated passenger watchdog groups, who will accuse the company of continuing to put profits before passengers.”18 This perception was unsurprising given that SWT had suffered a record £3.8 million penalty for late or cancelled trains in the 12 months ending in January 2000. This included £598,000 for running trains without the contracted number of carriages.19

2.11 Towards the end of 2000, commuters’ lack of trust was highlighted in a special rail complaints feature.20

* A Wokingham resident called SWT “liars” for claiming that Waterloo-Reading trains were now running on time, and noted that “SWT are cavalier in their treatment of passengers and constantly give either no information or disinformation to passengers, not allowing us to make informed decisions about alternative routes”.

* A Guildford resident complained: “They clearly do not have a clue what is going on with their trains.”

* A Worcester Park resident commented, “Clearly, in SWT’s language, “normal” means one third of services cancelled and the rest crammed to the gunwales and 20-30 minutes late.”

* An Ashstead resident complained: “Over the last few months I have experienced the most appalling level of customer service. I have telephoned, faxed and e’mailed SWT and Railtrack on a number of occasions and all to no avail. The paying passenger is fobbed off with meaningless letters which avoid the subject or a grovelling poster on the platform that appeals for yet more time to put right the mess they have made”.

* A Claygate resident wrote “I haven’t been on a Claygate to Waterloo train that has been on time, in either direction for at least a month, with delays varying from 10 to 45 minutes”.

* An Esher commuter stated: ”The journey from Esher to Waterloo should take about 20 minutes. With the recent speed restrictions, weather etc, this journey has been increased to an average of 40 minutes. Passengers beyond Walton-on-Thames never get a seat and end up crushed in first class corridors or negotiating bicycles in the mail carriage. Announcements are hardly ever made, and when they are it is always about one minute before the trains arrive. Trains sit outside stations for seemingly endless periods of time (again no announcements). When asked, staff shrug off questions about next arrivals and walk away”.

* A Mortlake commuter complained, “How come, when they know how many trains they should be running each day, there never seem to be enough drivers or guards on duty? I would have thought some of SWT’s huge profits should be put towards actually employing enough staff to cover their timetables – if they ever start running to time that is”.

2.12 These comments reflected those of railway commentator Alan Williams, who had written a year earlier, “A couple of months back, I told you about the perception gap that seemed to exist between the SWT that I and everybody else use, and the clearly quite different organisation that produces glossy brochures in a desperate attempt to convince us that it should retain its franchise. Lots of you wrote to say that, look as you might, none of you could find this brave new SWT”.21

2.13 With the passing of time, Stagecoach spectacles have grown ever more rose-tinted, as in this statement from SWT’s tenth anniversary press release: “When we took over in 1996 the first few years were by far the hardest, but we put our heart and soul into delivering a railway to be proud of”.

2.14 The statement is perhaps best considered alongside the comments of an employment tribunal in 2002. It ruled that SWT had wrongfully demoted train driver Greg Tucker, dismissing much of the company’s evidence as “incredible”, “risible” and “implausible, even absurd”. One key witness appeared to give evidence “without regard for truth and solely with an eye to where the advantage lay”.22

2.15 In April 2000 the increasing instability of Stagecoach became apparent when the value of its group of companies fell to £1 billion, compared with £5 billion two years earlier.23 Critics considered that the company had overstretched itself in the US.24

2.16 The company’s rewards culture had hardly helped. The personal fortune of Brian Souter and Ann Gloag, had reportedly risen to £600 million. Stagecoach Director Mike Kinski received a £250,000 welcome bonus in 1998, a £777,000 salary in 1998/99, and a £1,400,000 farewell bonus in 2000.25

The second franchise competition

3.1 The choice of Stagecoach in 2001 as preferred bidder for a second SWT franchise was a source of mystery and bewilderment to commuters. The outcry can be summed up by the words of the BBC’s transport correspondent, Paul Clifton: “Here’s the opinion of one regular SWT commuter, sent to me by e’mail: “The award to Stagecoach is the cruellest betrayal of passengers departing from Southampton since the unsinkable Titanic set sail”.”26

3.2 The Evening Standard commented that “For many Londoners, further evidence of a drop in accepted standards of service comes with the news that South West Trains has had its franchise extended for 20 years – on the same day that hundreds of passengers were hit by disruption on the network”.27

3.3 Paradoxically, a recent report by the Central Rail Users’ Consultative Committee (CRUCC)28 had stated: “The Deputy Prime Minister, in a meeting with CRUCC representatives in August 1999, said that he wanted to see the passenger representative network heavily involved in the process of franchise re-letting. Support, or otherwise, for particular bids would be crucial. He stated he wanted to see the CRUCC network involved in the running of passenger forums and hearings which might be held to consider bids”.

3.4 Perversely, the choice of Stagecoach bore no relation to any improvement in SWT’s performance. It remained the worst-performing passenger train operator in 2001. In the first 9 months of the year, passengers spent the equivalent of over 573 years waiting at its stations for late running trains.29 On a pro-rata basis, this would equate to more than 11 millennia under the proposed new 20-year franchise.30

3.5 Such evidence as is available suggests that Stagecoach bluffed its way into gaining some support for its proposals. For example, SWT Managing Director Andrew Haines publicised a £3.5 billion range of service and infrastructure improvements which were to be part of the Stagecoach bid and “offer real benefits for the people of Southampton”.31 In summary, he stated: “We believe that our proposals bring the most passenger benefits, and that they bring them more quickly than anyone else’s.” This was totally unrealistic against the background of Stagecoach’s declining finances. Nevertheless, only 10 days later, the news was leaked that Stagecoach was favourite for a new franchise and that “SWT had impressed the SRA by its straightforward approach to the bidding process.”32

3.6 Stagecoach’s “straightforward” approach was quickly exposed for what it was. Head of Stagecoach Rail Graham Eccles boasted that “For the big PR hit, what you do is add up guaranteed outputs, the primary aspirations and the secondary aspirations, and then you shout loudly”.33 SWT media affairs manager Jane Lee admitted that: “It is for the Strategic Rail Authority to decide which of our proposals it wishes us to go ahead with”.34 With Stagecoach’s precarious finances, the exciting bid which SWT had advertised for public approval had been exposed as just an offer to spend more of taxpayers’ money than its rival bidders, and much more than was ever going to be available.

3.7 It was crystal clear that virtually none of the “real benefits” would be realised, let alone in a short timeframe. So further disappointment was to be heaped on passengers who were already dismayed that Stagecoach had been chosen for the second franchise. SWT was subsequently censured by the Advertising Standards Authority, following a complaint by the South Hampshire Rail Users’ Group that its leaflets were falsely claiming that the committed investment under the new franchise was “billions”.35 Mr Haines sought unsuccessfully to overturn the judgement.

3.8 Stagecoach was by now at real risk of losing the franchise altogether through SWT’s poor performance. This meant more problems for commuters, as the company intensified its policy of omitting stops and terminating trains short of destination in order to create the impression of improved performance.

3.9 Transport Secretary Stephen Byers told Parliament: “I agree that the SWT franchise is not being operated as well as anybody would like. I want the Strategic Rail Authority to use the franchise renewal as an opportunity to secure real improvements for the travelling public. The Strategic Rail Authority must use the time over the next few months to negotiate an agreement with SWT – with Stagecoach Group PLC. If the SRA cannot negotiate a franchise renewal that puts the interests of the travelling public first, it will be prepared to seek a new franchise operator which will put the interests of the travelling public first, drive up standards and improve reliability.”36

3.10 In June 2002, SWT was alone among the 26 passenger train operating companies to have its performance penalty increased compared with the previous year. The fine of £12.5 million was the largest ever levied under the performance regime.37 The Conservatives condemned the figures as a disgrace and called for remedial action by the Government.38

3.11 Stagecoach was now desperately trying to grant share options from which its directors might profit. Hundreds of thousands of options in the troubled company were worthless after its shares plunged from a high of 284p to just 30p.39 One report stated: “The shares have fallen more than 80% in six months and credit rating agency Moody’s recently downgraded the company to junk status”.40

3.12 Fortunately for Stagecoach, Richard Bowker had become chairman of the SRA. He was formerly a senior executive with Virgin Trains in which Stagecoach had a 49% interest; Mr Bowker’s father was a senior Stagecoach executive; Mr Bowker had visited Stagecoach chairman Brian Souter’s church in Scotland (a round journey of 1,000 miles from the SRA’s London base)41 ; and Mr Bowker once worked with Graham Eccles.42 In addition, Mr Bowker admitted to the House of Commons Transport Committee that the timing of a £106 million grant to Virgin Trains had been determined by the need to stabilise Virgin and Stagecoach.

3.13 The SRA gave SWT an additional £29 million in subsidy, partly in return for introducing a few extra evening services. One of these was a little- needed 19.43 Poole-Waterloo. This was a return working of the Poole portion of the busy 17.15 from Waterloo, due into Poole at 19.37. The six-minute turnaround meant that, when the 17.15 ran late, all stops between Southampton and Bournemouth were axed and tired commuters left behind at Southampton Central.

3.14 A London man wrote, “How can the SRA be serious about giving SWT yet more money? It is incapable of running the railway now. Its trains are a disgrace with smashed windows, missing internal doors and graffiti both inside and outside. Perhaps Richard Bowker should take to travelling on SWT daily and experience the disgraceful service that he is pumping millions of taxpayers’ pounds into”.43

3.15 After an extraordinary delay, the SRA confirmed the second Stagecoach franchise on SWT not because of the company’s success, but to give it a chance to put right the mess it had created. The franchise period was reduced from 20 years to just three, with Mr Bowker commenting that the agreement would mean the company focusing “on what matters to passengers – recovering performance to a level that passengers deserve and expect and the replacement of slam-door trains with the biggest new train order in the UK”.44

3.16 The Telegraph later commented that it was this deal which “pulled the company out of reverse gear, since when the shares have trebled in value. It turned out to be a licence to print money.”45

3.17 Rail expert Christian Wolmar commented similarly that “The interim three-year arrangement agreed by Richard Bowker at the SRA in 2002 … was far too generous to Stagecoach. Under that contract, Stagecoach has been making super-profits at the expense of passengers and the taxpayer, netting a fabulous £58.9 million in the last year on turnover of around £500 million. That’s 12% of turnover. As I mentioned in my book, ‘On the Wrong Line’, a senior Stagecoach executive told me privately that the SRA had been a pushover and the company had been delighted by the deal.”46

3.18 Brian Souter and Ann Gloag saw a meteoric increase in their personal fortunes, sharing dividends which totalled around a quarter of a billion pounds, including £65 million in 2004 47 and £175 million in 2006 48

“Benefits” delivered by the second franchise

4.1 The second Stagecoach franchise was to deliver virtually nothing except a fleet of new trains which was in any case a mandatory requirement. These were distinct from the fleets acquired by other operators for the southern electrified routes. They quickly became notorious for having much less-comfortable seating than the trains they replaced, air conditioning which stings the eyes, and rough riding. Stagecoach had negotiated a cheap offer from Siemens at a time when the latter was facing the loss of 5,500 jobs.49 As if that were not bad enough, the order was cut from 785 to 665 carriages. A report by the Liberal Democrats found that overcrowding on SWT’s peak morning services increased by 77% between 1997 and 2004. 50

4.2 So tight was SWT staffing that, when the new trains were delivered, drivers could be released for training only by the cancellation of scheduled services. Sixty-four services a day were cut in the Guildford-Aldershot-Ascot area. One user complained of SWT’s “appalling mismanagement” with no forewarning or consultation with passengers.”51

4.3 In the period October-December 2002, SWT had the worst performance record of the London and South East train operators, with 59.9% of trains on time, compared with 65.4% in the same period of the preceding year.52 Chiltern scored 90.6%. A principal reason was that SWT had altered its timetable, creating track congestion, at a time when Anglia Trains was bidding to introduce an hourly Southampton-Norwich service. Revised up and down Waterloo-Poole trains were blocking one of the 4 tracks through Southampton Central from 10-past the hour to 20-past or 25-past, and another from 11-past to 30-past.

4.4 The SRA now decided that the way to make SWT more punctual was to cut services. It was accordingly announced that South Central’s trains from Victoria to Bournemouth would in future terminate at Southampton. This deprived Bournemouth of its direct services to the Sussex Coast and Gatwick Airport. In addition, some 70 of SWT’s own services were to be cut: “Among those trimmed will be two of the four trains an hour from Reading to Waterloo and one of the four trains hourly from Southampton and Winchester to Waterloo, a route where SWT already cruelly disappointed those who commute via what was once a fast, reliable and regular service. Though the cuts due to be removed are off-peak ones, the passengers concerned, who may have changed their working hours to avoid the cattle-truck conditions of peak-time travel, will suffer – and SWT admits as much”.53

4.5 At an operational level, it often seemed that SWT was running out of control. In August 2003, 100 passengers had a 9-hour journey, in a temperature of 30C, over the 79 miles from Southampton to Waterloo following a fatality. They were delayed at Micheldever, told they would backtrack via Havant, made to alight at Eastleigh, and then left in the single-carriage train of another operator for 3 hours with no water or ventilation. They had to smash windows to survive.54 On the same day, Mr Bowker opined that passengers were starting to see “real benefits” as the railways improved.55

4.6 In the same month, a Southampton mother who had never been on a SWT train received a letter from the company threatening a £1,000 fine or imprisonment unless a £10 fine for fare-dodging on a Bournemouth-Southampton train were paid. Despite the intervention of her husband and the media, SWT demanded a written statement from her.56

4.7 Perhaps significantly, given the links between Mr Bowker and Stagecoach, the popular and capable chairman of the Southern Rail Passengers Committee, Wendy Toms, did not have her contract renewed when it expired. Ms Toms had supported those calling for SWT to make sure trains were not cancelled and did not terminate short of their destination.57 Nobody at the SRA, which was responsible for the Committee, bothered to contact her before making the announcement public.58

4.8 At the end of 2004, SWT took another step to improve its performance by introducing a much slower timetable. The Rail Passengers Committee was scathing. Their press release stated, “On Monday 13 December, passengers will experience new timetables; and some will be shocked to find that there journey will take longer, or have a reduced service… Passengers want shorter journeys, not longer ones, but they are going to have to put up with them all the same. It will be completely wrong if targets are not made tougher and passengers do not get compensation for poor performance, even though their journey is slower than it was before and the performance figures show an entirely fictitious improvement”. The Daily Telegraph commented, “SWT has struck on one of the great philosophical truths of all time: the lower the standards that you set yourself, the easier they are to meet”.59

4.9 A SWT leaflet claimed that "Over 80 local authorities and passenger user groups across our network have been consulted and where possible their feedback has been acted on". There are only a handful of user groups across the SWT area. The South Hampshire Rail Users' Group and the Kingston Area Travellers' Association were not consulted, although SWT was well aware of their existence. The Alton Line Users' Association was approached but one member stated, “SWT sent us a draft of the new timetable. We wrote back saying it was completely unacceptable for users. They wrote back saying they were going ahead with it anyway. I wouldn’t call that consultation”.60 When challenged by Dr Julian Lewis, MP for New Forest East, Andrew Haines (who was soon to depart) gave the lie to the leaflet’s claim in responding: “It would be impossible for us to carry out detailed consultation on something as radical as a completely new timetable.”

The third franchise competition

5.1 With its unenviable record looking likely to jeopardize a third cash-cow franchise on SWT, Stagecoach had turned to spin-doctoring. This was notwithstanding the fact that, when transport authorities in the big provincial cities set up a support unit to get tough with profiteering bus operators and lobby for re-regulation, it responded, “Why is money being spent on expensive spin-doctoring and not on what passengers want?”.61

5.2 The first manifestation of the new approach was the launch of SWT’s glossy e-motion passenger magazine. Then, in September 2004, the company announced it was to spend £750,000 on cinema, TV and newspaper advertisements telling the public how good it was when official statistics showed its performance from April to June had been the worst of the 10 operators serving London.62 The advertisements would promote its new trains but not refer to performance.

5.3 The core of e-motion’s persuasive PR comprised the Passengers Panel pages. These gradually turned into little more than anodyne monologues by ‘independent’ chairman, the non-executive Stagecoach director Sir Alan Greengross. He had formerly been a critic of SWT 63 in his role as Chairman of the London Regional Passengers Committee. The Kingston Area Travellers Association recorded that “A member of SWT’s so-called Passengers Panel has resigned because it does not serve the interests of passengers. Venessa Wilkins of Norbiton said that passengers’ suggestions were rarely acted upon and were a waste of time. She was not even thanked for her 18-month contribution to the Panel.”64

5.4 The Panel was clearly intended to be SWT’s mouthpiece, as in this little item attacking MPs who speak up for their constituents:
“Counting the spoons As the voice of train passengers on SWT, it’s vital that we understand the issues that really matter to you so that we can protect your interests and ensure your views are strongly represented. The politician faced with a rail problem and little idea of how to deal with it cries “We have to put passengers first”. If they have no idea at all, “have” becomes “determined” [sic] and they shout even more. Isn’t there a saying ‘the louder they shout their innocence, the faster we count the spoons?’” 65

5.5 E-motion descended into a parallel universe when it included among a list of “frequently asked questions”:
“I think that South West Trains has done a pretty good job recently and deserves a new franchise, and I’m not alone in this. Before all of you at the Panel groan and consign my letter to the waste-paper basket as just a note from another sycophant, let me hasten to add that there are a number of my fellow passengers who would not agree, which is exactly why I am writing. What can the ordinary passenger do to make his or her views heard by whoever awards the new franchises?”66

5.6 The perceived need for this purported FAQ - which is framed as though from a regular commuter - can be understood against the comments of Stagecoach director Rufus Boyd at the February 2005 meeting of the Hampshire Economic Forum.67 He opined that performance across the network was fine and the only problem was poor press coverage due to long-distance commuters who made the “ultimate distress purchase” in buying a home distant from their workplace. Any other kind of company would bankrupt itself by being so dismissive of its best customers.

5.7 Sir Alan’s spinning effectively refreshed Alan Williams’ ‘perception gap’. In the September-October 2005 issue of e- motion Sir Alan was ‘interviewed’ by some un-named person from SWT, making comments on behalf of the ‘independent’ Panel such as: “Everyone knows that things go wrong on the railway. We also acknowledge that much of it…is not the fault of South West Trains”; “You make a convincing case. If you can turn your plans into reality, you will be receiving and deserving of thanks from your passengers”; and “We at the Panel believe… that South West Trains has come a long way”.

5.8 Stagecoach’s prospectus for a third franchise was to bear what was, in the context of SWT, the Cloudcuckooland title Building on Success. It included claims such as, “Stagecoach’s success has been built on listening to customers and using their special insight to improve services even further. Local managers are empowered and encouraged to build relationships with the communities they serve – consultation lies at the heart of the Stagecoach approach.” But not in the case of timetables affecting huge numbers of people? And not with much credibility even in the case of the Passengers Panel?

5.9 Despite the importance of SWT in carrying 400,000 passengers a day, the new 10-year contract was apparently finalised under pressure, with wrangling over the terms continuing until 2am on the day the award was to be announced.68 For the first three years, the franchise was to continue to attract subsidy. Thereafter Stagecoach was to pay a premium. Press reports recorded that financial experts were highly sceptical of Stagecoach’s ability to deliver.

5.10 The Department for Transport was nonetheless nominated, though unsuccessfully, for the Whitehall and Westminster World award for the quality of their procurement process: “The Office of Government Commerce considered the valuation process to be sound, robust and auditable, and to have been conducted in full accordance with best practice. Key stakeholders were noted to have worked together as a very effective project team, and team spirit was seen to be strong. The assessors particularly commended the integration of all relevant parts of DfT into the project, and the continuous drive to make the bid process more efficient, reducing costs for both sides.”

5.11 Two months after the franchise award, the Transport Committee’s press release on their report Passenger Rail Franchising struck a remarkably discordant note, declaring that, “The system of passenger rail franchising is a complex, fragmented and costly muddle which is unlikely to provide the innovation and investment needed for the passenger railways of the future. The system has had a decade to prove itself, but it has failed to achieve its core objectives.”

5.12 SWT held an on-line poll to see whether passengers thought Stagecoach should have retained the franchise. At 16 December 2006, the poll showed 70% saying ‘no’ and 30% saying ‘yes’, just as SWT’s new e-motion magazine published figures of 39% saying ‘no’ and 61% saying ‘yes’, with its ‘independent’ Passengers Panel claiming there was no doubt that a ‘huge majority’ of passengers were glad about the franchise outcome. Passenger Focus confirmed that the figures published in e-motion were extracted on 28 November. The astonishing swing in the following fortnight inevitably suggests that people connected with SWT had voted early on, biasing the vote. So even 30% in favour of Stagecoach was probably too high as a genuine reflection of public opinion.

“Benefits” delivered by the third (current) franchise

Failures in meeting obligations

6.1 Justification for the scepticism about Stagecoach’s ability to deliver came from data released under the Freedom of Information Act some 3 years later. The amounts of the 3 failed bids were broadly comparable - £636 million, £513 million and £501 million - whereas Stagecoach had bid almost £1.2 billion.69 Unsurprisingly, therefore, although it has become fashionable for train operators to complain about DfT ‘micro-management’ of franchises, Stagecoach simply ignored its franchise obligations from the outset. Far from investing in SWT, Mr Souter admits that he has implemented cuts amounting to £110m. 70

Capacity

6.2 Passengers were promised that “Capacity will be increased on both mainline and suburban services by around 20% ---- there will be more seats for many passengers on busy routes, with longer trains and extra services operating.”71

6.3 In reality, capacity was increased by stripping 6,500 seats from the suburban trains which serve SWT’s busiest routes, with further loss of seating in 28 outer-suburban trains.72

6.4 The comfortable Wessex Electric trains, paid for by taxpayers specifically for the long-distance Waterloo-Weymouth route, were taken off lease, despite commuters having suffered steep fare rises linked with their introduction. Hard-seated class 444 units from the Waterloo-Portsmouth line took over some of their turns and cramped outer-suburban class 450 units took over the rest.

6.5 Many Portsmouth-Waterloo commuters were crammed into outer-suburban class 450 units. SWT persistently argued that this was necessary to provide more seats between Woking and to London. However, at a committee meeting of the Portsmouth Rail Users on 22 March 2007, the company admitted that the real reason for the reshuffle had been to avoid the higher leasing charges for the Wessex Electrics, and claimed this was not made public for commercial reasons.

6.6 In fact, the shortage of capacity east of Woking has in large measure been due to cancellations and short-formed trains, in many cases arising from defective rolling stock. Such failures have frequently resulted in the loss of hundreds of seats, and the South Hampshire Rail Users’ Group has records spanning several years.

6.7 The 120 Wessex Electric carriages were replaced, within the reshuffle, by the bargain-basement lease of 120 Juniper carriages which had already been returned to the lessor as unreliable. After several years out of use, the Wessex Electrics are now starting to provide long-distance comfort on short-distance services between Victoria, Gatwick and Brighton, under GoVia’s Southern franchise, which has excelled at the 2010 National Rail Awards. Overall, there seems to have been a serious misuse of taxpayers’ money.

6.8 Following the changes on the Portsmouth line, commuters set up a website which attracted 1,460 signatures. A number of MPs with constituencies on the route, such as Mike Hancock, have been strongly supportive of the protestors. This is an issue which refuses to go away. A recent survey by Portsmouth City Council found frequent complaints of cramped, uncomfortable conditions on board the class 450 trains. It discovered that 74% of passengers went out of their way to avoid them (thus boosting overcrowding on other trains), and many complained of sciatica and other back-related problems as a result of the 97-minute journey. Of passengers travelling from Portsmouth and Haslemere to London, 98.5% preferred the class 444 trains which had originally been intended for the route, and 85% found it no easier to find a seat. Now the council is calling for the class 450 trains to be taken off the line altogether.73

Fares

6.9 Passengers were also told: “It is expected that many regulated season tickets into London will be discounted for passengers travelling outside the height of peak times.”74

6.10 Great expectation: nil delivery. Instead, SWT introduced a 20% surcharge on off-peak trains arriving in London before noon. It also increased the premium for first class travel from 50% to 80% and raised car parking charges by up to 21%. A Surbiton commuter complained in the Evening Standard that his annual fare to Waterloo was now £1,640, and his car parking charge £2,040.75

6.11 The 20% surcharge on off-peak tickets does not apply to stations, such as Basingstoke, where a more ethical operator provides alternative services. Such cynical exploitation of a monopoly inevitably suggests that all passengers need some protection against excessive fare increases. There was a huge outcry about what was justifiably seen as Stagecoach’s abuse and exploitation of passengers. South Hampshire MPs Sandra Gidley, Mark Oaten and Chris Huhne signed a highly critical parliamentary motion calling on the Government to block excessive increases. A Locks Heath resident made the apposite comment: “I blame the franchise machinery as the root cause and SWT is exploiting it because it can…The Tories are to blame for the original misguided concept but it’s a typical New Labour centralised shambles to keep it going”.76

6.12 In order to make the cheaper off-peak tickets, cynically re-branded ‘super off-peak’, even less attractive, a peak restriction from 16.00 to 19.00 inclusive was introduced from January 2010 (SWT’s warning announcements and posters signally fail to not clarify whether this applies to the London Travelcard portion of a journey, even though discrete rules apply to travelcards). These tickets are now some of the most time-restricted in Britain. Unsurprisingly, SWT proved more vulnerable to the recession than operators of comparative franchises. Footfall at Waterloo was down by some 3.85% in 2008-09, compared with a decrease of barely 1% at Victoria and increase of about 1% at Charing Cross, where no services are provided by Stagecoach.77

6.13 In addition, Stagecoach’s exploitive fares expanded the field for parallel road coach services, to the detriment of the environment. National Express has increased its services between Southampton and London, and First Group has introduced Greyhound services between London, Portsmouth and Southampton. Stagecoach itself has stepped up its Megabus service.

6.14 Although there is a legal obligation to sell passengers the cheapest ticket for their journey, SWT’s pricing structure means people now pay a surcharge if they don’t book separate tickets either side of Woking. A peak return from Bournemouth to London costs £84, but a return from Bournemouth to Woking plus a return from Woking to London jointly cost £70. Barry Doe, a rail pricing consultant (who has in the past lobbied the South Hampshire Rail Users’ Group, in consultation with SWT management, on behalf of Stagecoach 78 ), calls Woking the “magical line” for price drops on the London route, and has described the higher prices as “legalised theft”.79 By way of comparison, a peak return from Southampton to Waterloo by SWT costs £63.90, whereas a Peak Daysave from Southampton to Victoria by Southern costs £30, or £20 each where tickets are bought for five specified days within a period of one month.

Station enhancements

6.15 A further promise to passengers was that: “The franchise will provide £40m investment in enhancements at stations.”80

6.16 This was followed by busy travel centres being shut across the franchise, while other operators continued to enhance such facilities. Southampton, which had lost its bus station through Stagecoach’s destructive greed, was to lose the busy Travel Centre at its Central rail station as well. At 6am on 23.9.2008, the desk computers were still switched on at the Travel Centre. At 6pm, the by-then former Travel Centre was veiled with polythene sheeting. A member of SWT confirmed that the hasty closure was because of big public pressure to keep it open. The main entrance at Southampton Central became such a blot on the city, that £3m is to be spent on the station,81 with SWT meeting one quarter of the cost, and the remainder effectively a subsidy from Network Rail and Southampton City Council. Travel Centres have now been stripped out across SWT, leaving a regional information desert.

6.17 When Transport Secretary, Lord Adonis, made a 2,200 mile fact-finding trip on 40 trains, he singled out Southampton Central station for criticism.82 At 8pm there was no refreshment outlet on a station used by 5.5 million passengers a year. Writing in Parliament’s in-house journal, he described the experience as the “low point of the week”. In addition, he used the passenger helpline for another complaint but, like countless SWT passengers before him, got no reply.

6.18 SWT responded that catering outlets were not their responsibility. Yet an article about Brian Souter being in line for another, £6.3 million, bonus drew the response from the proprietor of Coffee Charisma, Godalming: “I am a tenant of SWT and they are asking me for a 140% increase in my rent, when the footfall at the station I have an outlet has increased 10% in 3 years”83 A report commissioned by Lord Adonis, following his tour, established that 11 of the worst 20 large stations nationally were managed by Stagecoach or the Stagecoach-Virgin partnership.

6.19 SWT offered a further station “enhancement” by proposing big cutbacks in ticket office opening hours, which would also involve the affected stations being left unstaffed for longer periods. This brought widespread condemnation from MPs, User Groups, Passenger Representatives, the Unions, and individuals. Dr Alan Whitehead, MP for Southampton Test, laid an early day motion which attracted cross-party support:

“That this House notes with extreme concern plans by South West Trains to close ticket offices and cut ticket office opening hours at 114 stations; believes that such cuts cannot be justified when these stations have seen a combined increase in passengers of nearly 27 per cent. in the last year; is further concerned that the cuts will dramatically increase the number of stations that will lose their ticket offices entirely during weekends and will leave stations unstaffed at weekends and in the evening making railway stations and passengers who use them feel less secure; believes that replacing staff with ticket machines will also reduce the quality and range of services available to passengers; and calls on South West Trains immediately to withdraw its plans.”

6.20 MPs John Denham, Alan Whitehead and Sandra Gidley attended a demonstration at Southampton Central on 18/07/2008, handing out leaflets about the cuts. Alan Whitehead said, “Without staff how can stations be as safe – all you will have is a button that means you can talk to someone five miles away and you won’t be able to talk to staff to make sure you get the cheapest ticket possible. If this goes ahead we may have to talk to a few ministers and see if they think South West Trains is giving the service it promised when it took on the franchise”. John Denham echoed these sentiments and added, “A lot of people will be affected by this and a lot took the leaflets away with them”.84

6.21 At 06.20 on the day of the demonstration, a member of the South Hampshire Rail Users’ Group spotted a SWT official putting up a poster, inside the main station entrance, which said that London Travel Card operators would be conducting a survey at the station that day, and that £2 would be donated to charity when people completed a questionnaire. We could find nobody who had heard of any similar survey, nor of such short notice being given of any passenger survey by a train operator. It is not clear why anyone would have wanted to conduct such a survey at Southampton, especially as passengers in London were being urged to use the new Oyster Cards wherever possible. This was pretty obviously a distraction technique by Stagecoach. Protests elsewhere included “crisis talks” between Woking MP Humphrey Malins and SWT management.

6.22 On 15 January 2009, transport correspondent Paul Clifton reported, on BBC South Today, that Stagecoach planned to cut SWT’s workforce by 10%, with loss of almost 500 staff. However, the losses were to be in administrative and managerial grades. An internal memorandum was then leaked to the BBC, showing that the losses included 93 full-time and 87 part-time ticket office staff, 62 full-time and 9 part-time platform staff, and just 22 full-time and 3 part-time managers. SWT refused to comment and the BBC discovered that the RMT had not been told. A video of Mr Clifton and presenter Sally Taylor, both shocked by the scale of the deception, was placed on the BBC’s website.

6.23 Although the Transport Secretary, Lord Adonis, made SWT scale back the cuts in ticket office opening hours by 80%, the company has since implemented a second round. To some extent, they are academic because there is substantial anecdotal evidence that SWT ticket offices are often closed during opening hours. Making passengers use machines can increase revenue. Machines don’t sell time-restricted tickets until the time threshold is reached. So if passengers purchase a ticket just before the threshold, the machine will sell them the dearer ticket, even though the cheaper one is valid on the next available train.

6.24 Following a Passenger Focus survey of SWT’s ticket machines, Chief Executive, Anthony Smith, said: “Ticket machines can present bewildering jargon, a barrage of information and choices as well as incomplete information about ticket restrictions. This is the most frustrating of all. As a result, some passengers give up and join the ticket office queue”.85 Passenger Focus has also confirmed that queueing times are often longer than the rail industry standards, with the longest queues at Guildford, Basingstoke and Winchester.

6.25 SWT arrogantly dismissed the findings. However, observations by a Surrey rail user have established that long queues build up at Guildford ticket office because, as is so often the case at major SWT stations, few ticket windows are open. Passengers at Guildford are routinely paying too much, and it can be difficult or impossible to get cheaper tickets from the machines even after time thresholds have passed.

Timetables

6.26 December 2007 saw the introduction of a new standard-hour timetable between Waterloo and Weymouth, which was a franchise commitment. The DfT’s objectives were to accelerate the Waterloo-Weymouth fast trains and use rolling stock more efficiently in meeting demand. Unfortunately, the DfT’s consultation on the changes was seriously flawed, for example because the proposal to remove the stop at Totton (the fourth-largest intermediate town between Southampton and Weymouth) from the semi-fast services was omitted. Stagecoach has met the required stopping pattern for the Waterloo-Weymouth fast trains but not for the semi-fast Waterloo-Weymouth trains or the Waterloo-Poole trains. The substantial element of non-compliance was exposed following a protracted Freedom of Information struggle by the South Hampshire Rail Users’ Group.

6.27 The purported benefits of the new timetable are difficult to find. Weymouth-Waterloo trains became only 3 minutes faster, because of the slackness of SWT schedules, but journey times for services from the busy smaller Dorset stations of Upwey and Wool were extended. Poole, a much larger town than Weymouth, had its fastest London journeys extended by 4 minutes. In the busier London commuter belt east of Poole, off-peak London services from Christchurch and New Milton were reduced from twice-hourly to hourly, though not in the opposite direction. The direct off-peak journey time from London to Totton increased by 32 minutes. The service from Totton to Christchurch (the next town westwards) increased from 28 minutes to 59 minutes, with no train on Mondays to Fridays between 15.35 and 17.01.

6.28 Dr Julian Lewis, MP for New Forest East, called the changes an ‘appalling outcome’ for the people of Totton. Although faster journeys from London to Totton are theoretically possible by changing at Southampton, SWT insists on sending off the Totton train 30 seconds early, even when people are racing along the platform to make the connection. It argues that this benefits the ‘vast majority’ of passengers. However, since these trains are allowed 3 minutes for a Beaulieu Road stop which few of them are scheduled to make, leaving Southampton on time simply means standing at Brockenhurst for 28 minutes rather than 25. Punctuality is indeed important for passengers, but a major reason is the need to make connections.

6.29 The issue of timetable improvements was raised at a Transport Forum mounted by New Forest District Council in January 2010. The SWT representative said that the company was looking to accelerate the Waterloo-Poole trains from the December timetable. Nothing was done. Disproportionate revenue protection measures

6.30 In 2007, a Times transport correspondent and a BBC Radio Solent presenter who had difficulty obtaining tickets at SWT stations were both penalised with hefty fares on board trains. This led to the Times and the BBC contacting the South Hampshire Rail Users’ Group, and to a radio report and article in the Times of 18 June. Stagecoach claimed that their policy had not changed, but a secret memo was leaked, which exposed Stagecoach as adopting a fascist approach to passengers and staff alike.

6.31 Guards were being threatened with disciplinary action if they did not penalize passengers with maximum fares if they boarded without tickets. It meant a passenger might pay more than double the normal price. The memo told guards to treat passengers as fare dodgers even if they asked to buy a ticket. It told them they would be accountable for accepting excuses even if passengers said they had queued for 15 minutes and could have missed their train. The memo also said that children must be penalized even at weekends and bank holidays when cheaper fares were available. Guards must tell passengers they could be liable for an additional £20 on the spot fine and could be prosecuted for fare evasion. “From now, your commercial duties will be measured in three main areas: the amount of revenue you collect; the type of tickets that you sell; and the number of penalty fare warnings that you issue.”

6.32 Chris Huhne, MP for Eastleigh, wrote86 that the policy was out of order. He called for a clause in franchises insisting on fair and proportionate treatment of passengers. Otherwise people would be put off using rail, at odds with environment policy. Far from responding, SWT carried on stripping out its permit to travel machines. These had been considered an essential safeguard for passengers who might have difficulty in obtaining tickets, when the penalty fares system was introduced. In addition, SWT’s leaflet ‘Buying your ticket before you board’ made clear that people who make genuine mistakes will be penalized: “We’ve produced a leaflet to help you make sure you don’t get caught out by accident and have to face the consequences…. Some people make costly mistakes about ticket types when they travel on our trains … Having an invalid ticket counts as having no ticket at all.”

6.33 ‘RAIL’ editor Nigel Harris argued that SWT was damaging the reputation of the rail industry as a whole: “Maybe it’s because many railway people don’t actually pay fares – or not in full – especially very senior managers. But no-one likes to feel ripped-off and once you offend the British sense of fair play, you’re in trouble. Politicians forget this too but a bloody nose at election time usually reminds them. So, I watched in despair in mid-June as The Times ‘exposed’ South West Trains’ pre-meditated policy to “… fleece its passengers.” The harsh words “sharp practice”, and “profiteering” were used. SWT was “the unacceptable face of rail privatisation.” This is all enormously damaging – not just for Stagecoach, but the whole industry. RAIL was critical of SWT’s recent moves to manipulate the peak and impose 20% increases on off-peak fares and The Times was equally unimpressed. SWT’s protests about easing the post-peak rush were unconvincing: this is all about maximising revenues.”87

6.34 Despite huge previous concerns, SWT continues to get more disproportionate in pursuing revenue protection. Two examples of cases where members of the public have contacted the South Hampshire Rail Users’ Group, and a third case from the press:

Example 1

One morning in October 2008, a season ticket holder arrived at Southampton Central with his bike and found the gates unattended (a common event at the station), contrary to legal requirements. He therefore opened the manual gate, to avoid missing his train to work. Staff then appeared and he politely showed his season ticket. He was given a £55 penalty for opening the gate, under a remote bye-law which has probably been carried forward from the days when mail was carried on passenger trains and some stations had gates exclusively for postal staff.

He refused to pay as he considered he had done nothing wrong. He was then prosecuted and threatened with a £1,000 fine, 3 months in prison or both. A criminal record would have prevented him from continuing his charitable work with vulnerable serving and former service men and women.

In April, the Court directed SWT to release CCTV images to the passenger, along with details of the gate and its signage. SWT sent him just a polaroid image of the gates and confirmed in writing that they had looked at the CCTV images and destroyed them.

In July, the passenger had to come back from holiday in Spain to attend court. SWT pulled out all the stops, producing three members of staff to give evidence against him.

The passenger considers that their evidence was partly false, and the destruction of the CCTV tapes inevitably looks suspicious. In any event, the court found the passenger not guilty, said the case should never have been brought, and admonished SWT for wasting court time.

Example 2

In January 2009, a woman hampered by crutches made a 5-mile journey to Axminster station to buy a ticket to travel to Basingstoke the next day. She got the ticket in advance because she had read of reduced ticket office opening hours and would only have a short time to get from work to catch her train. She found the ticket office closed during opening hours (another very common occurrence on SWT), so had to use the ticket machine. The screen was difficult to read because of glare from the sun (a well-recognised problem on SWT). She therefore inadvertently obtained a ticket dated the day of purchase rather than the day of travel.

The train guard clipped her ticket without query. At Basingstoke, the barrier rejected it. A member of staff took her details but said it was a common situation which would probably be overlooked. SWT’s prosecutions department then wrote saying they had intended to take her to court, which could lead to a £1,000 fine, 3 months in prison, or both. However, as it was a first offence, and taking her mitigation into account, they would agree to a Caution with Applied Costs: £45 operational costs for dealing with the incident; £10 for writing the letter; and £29.40 for the fare avoided: a total of £84.40 to pay within 14 days.

The woman pointed out that she and her husband were known to the previous Managing and Commercial Directors of SWT, who could give character references. Her husband had arranged a ceremony for one of the Wessex Electric trains to be named “Bournemouth Orchestras”, and the couple had hosted a celebratory Promenade Concert at the Albert Hall on behalf of SWT. She felt the penalty fare was completely unjustified and would opt for the case to go to court. SWT staff from Axminster would be prepared to give evidence in court on her behalf and one had said that SWT would rather proceed than admit a mistake.

This drew the response:
“Please allow me to inform you that any member of Stagecoach South Western Trains Limited staff from Axminster station who is prepared to attend court on your behalf must do so in their own time. If they intend to appear during their allocated working hours an arrangement for compensation to reimburse the costs of staff and their replacements must be made between Stagecoach South Western Trains Limited and you; before the court date.”

“……With regard to your comment allegedly made by a member of staff at Axminster station, that ‘South West Trains would rather proceed than admit a mistake’, I find such an accusation to be a most scurrilous, malicious and disloyal statement, which I take personally, and I am in contact with the Area Manager for the West of England to ensure it is investigated as soon as possible”.

The writer ended by saying that “I have no doubt that a prosecution would have a devastating effect on you and I am therefore prepared to allow the offer of a Conditional Caution to stand until 12.00hrs, 31 July 2009”. Overall, this response recalls Christian Wolmar’s book ‘Stagecoach’ in which he detects, “an arrogance and deep conviction that the company is right and everyone else is wrong.” Dismissing reasonable criticism out of hand, sometimes in one sentence, is a familiar Stagecoach characteristic.

Just before the date of the hearing, the manager of Axminster station successfully pressed SWT to drop the case. The withdrawal was conveniently made on the basis that it had not been known the passenger was on crutches, rather than because the whole case against her was totally outrageous.

Example 3 88

A 29 year old man, who works for an animation company, was issued with a £2 unpaid fares notice in 2008. He was on his way to work from Strawberry Hill, where he lived with his father, to Richmond after forgetting his season ticket. He claims he tried to buy a ticket but the machines were not working and the inspector would not accept his bank card.

He did not hear from SWT until a year later — after he had moved to Bristol — when his father called to say he had been threatened by bailiffs at his home in Strawberry Hill. Debt collectors said that if he did not pay them £600 they would pick the locks and take double the amount in goods. The man said: “I went to the Citizens Advice Bureau and they said that it was illegal and that if it happened again to phone the police. My dad felt completely threatened.”

He went to Bristol magistrates’ court to say that he had received no court correspondence but about four months later his father told him he had been threatened by bailiffs again. On 10 March he received a summons to Richmond-upon-Thames magistrates but could not get time off work to attend. He then faced a fine of £217. A spokesman for Her Majesty’s Courts Service said: “This matter has not been brought to our attention previously. We would welcome details so we can look into it.”

6.35 The South Hampshire Rail Users’ Group has already submitted details of many other revenue protection abuses, in response to the DfT’s recent consultation on penalty fares. Overall, the administration of the penalty fares scheme is clearly abusive on SWT and there have been press reports of revenue protection staff earning commission, which would incentivise disproportionate behaviour. SWT’s ‘zero tolerance’ of people boarding without tickets can operate profitably because of long queues for tickets, ticket offices being closed during opening hours, and guards not being fully informed of such problems.

6.36 Oyster Card changes provided for another exploitive ruse: “---At a recent London Travelwatch meeting, Transport for London (TfL) reported that only 3% of people who should be loading Oyster Extension Permits onto their Oyster cards are actually doing so. TfL also claim that Penalty Fares (PFs) are not being issued, in order to give people time to adjust. However a member of South West Trains (SWT) staff on Railforums.co.uk reported that SWT are openly flouting this instruction, and are charging PFs. Given that 97% of people are not bothering with this incredibly complex OEP system - indeed, it is likely they do not know about it, or do not understand it as they do not possess a master’s degree in Fares and Ticketing - it is quite sickening that SWT are acting in this way. But then it is only to be expected by a company owned ultimately by Brian Souter, who is infamous in the transport industry for controversial practices.”89

6.37 A recent feature of SWT has been a raft of measures, sometimes in conjunction with the police who always claim to be overstretched, to intimidate passengers. Stations have a clutter of threatening posters, particularly about penalty fares. At Southampton Central, even ‘loitering’ is proscribed, yet what is a station except a place where people wait for trains? Passengers, including David Willetts MP for Havant, have been driven to distraction by announcements, many of them threatening penalties for holding the wrong type of ticket. Announcements on stations warn about smoking, skateboarding and cycling, when no smokers, skateboarders or cyclists are around.

6.38 An innocent passenger was accosted by armed police at Bournemouth station while shaking hands with a friend.90 He was apparently suspected of being the person who had earlier been behaving suspiciously in Basingstoke just because they were both black. Twenty officers randomly stopped passengers at New Milton station on the pretext of looking for drugs, but no arrests were made.91 Police have reportedly been conducting random stop and search acts at Waterloo station.92 Students from Richmond College and transport police clashed after a ticket-checking operation led to a crush at Twickenham station, trapping people between the barriers and the ticket office doors (So what’s the point of barriers?). Three people were arrested and one person was taken to hospital.93 In March 2010, a 25- year-old musician was ‘invited’ to leave a Portsmouth-Southampton train by SWT’s Community Rail Officers. They had had nothing better to do than snoop on him, and noticed he had written the word ‘killers’, the abbreviated name of a pop group.94

6.39 Stagecoach continues on its profoundly anti-passenger trajectory. A young couple travelling with two £6.00 Megatrain tickets from Waterloo to Southampton decided to alight at Eastleigh, 53/4 miles short of their booked destination. Had they, senselessly, continued to Southampton and bought single tickets back to Eastleigh, it would have cost them £6.40 (one third less with a railcard). For this infringement of Stagecoach’s spurious rules, they were fined £114.95

Reduction in hygiene

6.40 An important change which SWT has not publicised is that carriage interiors were to be wet-cleaned annually instead of monthly;96 it seems reasonable that passengers should know of the potential health hazard before boarding their train. As a result, trains are often in a terrible state.97

Cash-rich Stagecoach gets another rich reward from taxpayers

6.41 Stagecoach had seemed to be running out of ideas which might further boost its profits on SWT at the expense of passengers. Mr Souter’s latest dividend had reportedly been just £6.3 million, and pressure was applied to SWT managers. They lost their 2009 performance bonuses for missing financial targets, and were warned they would receive no bonus in 2010 unless “at least a further £7m of unbudgeted, sustainable savings are identified and implemented by year end”.98 Passenger income and car park revenue would be ignored in the calculation and, for the maximum available bonus to be paid, savings had to be at least £10 million.

6.42 By this time, Stagecoach was engaged in a legal battle with DfT over the terms of its contract. It wanted the revenue support mechanism, under which DfT pays a proportion of franchisees’ losses if they fail to hit revenue targets, to be brought forward by 10 months from what DfT considered the contractualised date. Remarkably, Stagecoach won, meaning that taxpayers face an extra £70m-£100m of unbudgeted expenditure at a time of economic stringency. Such stringency appears to elude Mr Souter himself, who recently decided to spend £100,000 to the further detriment of the environment, on jetting family and friends to a party in Moscow to celebrate his daughter’s 21st birthday and the 30th anniversary of the foundation of Stagecoach.99

6.43 Analysts at KBC Peel Hunt now say Stagecoach’s “uniformly strong” figures make it one of the first players to show a significant bounce-back from recession. They also say it has a huge acquisition potential, with £340 million of unused facilities on its balance sheet.”100

Facts hiding behind figures

6.44 There is now a six-monthly ritual by which Passenger Focus’ National Rail Survey findings are followed by a copious supply of SWT ‘UPDATE’ leaflets proclaiming high levels of passenger satisfaction on the franchise. However, its overall rating of 86% refers only to the journey that a passenger has just made, so fails to reflect the ongoing experiences of commuters. Moreover, on SWT, an 86% rating means that about 20 million passengers a year are dissatisfied, a huge failure after nearly 15 years of operating experience.

6.45 The leaflets then cleverly switch from actual percentages to percentage movements, to disguise some much poorer scoring: * Satisfaction with car parking is a ‘3% increase’ rather than 44% peak and 46% off-peak;
* Helpfulness and attitude of on-train staff is a ‘4% increase’ rather than 66%;
* Availability of on-train staff is a ‘5% increase’ rather than 50% (taken in conjunction, these last two statistics suggest that about 33% of passengers find a member of staff and get the help they need);
* Provision of information during the journey is ‘a 3% decrease’ rather than 71% peak and 74% off-peak;
* On board toilet facilities are a ‘3% decrease’ rather than a shameful 31% peak and 39% off-peak; and
* The cleanliness of the train is ‘a 4% decrease’ rather than 71% peak and 75% off-peak.
The leaflet omits to mention that one quarter of off-peak passengers are dissatisfied with the room to stand or sit. This seems shocking, given that they are paying some of the highest fares in Europe.

6.46 On the acid test of value for money, satisfaction has increased from an abysmal 22% to 24% among peak passengers, possibly reflecting reduced overcrowding through loss of custom, whilst it has fallen from 46% to 42% among off-peak passengers, possibly reflecting discontent with the ‘legalised theft’ in the SWT fares structure pinpointed by Barry Doe - and that was before the new evening restrictions were introduced.

6.47 On how well SWT deals with delays, only 34% of peak and 41% of off-peak passengers are satisfied. People don’t like being dumped like rubbish at intermediate stations when they are already delayed and may have connections to make or appointments to attend; they don’t like standing on bleak, unstaffed stations watching their train race past; and they don’t like having train doors slammed in their faces as they run to make a connection.

Conclusion

6.48 Dr Cable is right. Capitalism, in its most unacceptable form, takes no prisoners. The lesson of the Stagecoach franchises on SWT is that, with an ethically-limited operator focused on greed, ‘heads’ the operator gains and ‘tails’ passengers and taxpayers lose. That raises the fundamental issue, particularly with the ascendency of the green agenda, of whether the railways exist as a public service, or as a cash cow for private operators.

6.49 Mr Souter, of course, wants to continue on his destructive course. With an extraordinary display of amnesia or ethical deficit, having ignored the most passenger-oriented obligations in the SWT franchise, he has started to complain of DfT micro-management and wanting greater freedom to boost shareholder rewards (a significant proportion of which go to himself and others at the top of Stagecoach):

“Souter believes improvements must be made to the existing rail franchising model, however, to give operators greater freedom to invest in improving services for passengers, reduce the burden on taxpayers, cut unnecessary micro-management by government and better protect services in challenging economic times.

The emphasis should be on high levels of customer satisfaction, said Souter, with each train operator free to determine the best way of achieving that objective.

“All of this can be achieved while ensuring a sensible risk transfer to the private sector, which allows for shareholder returns commensurate with performance and capital put at risk”, he said.”101

6.50 It’s not hard to deduce that his Chairman-Elect Sir George Mathewson (who joined Stagecoach from the Royal Bank of Scotland in 2006) will be fully supportive of his endeavours. Sir George seems to fit the Stagecoach ethos rather well, as in the following comment102
: “--- Sir George Mathewson, the former chief executive and chairman of Royal Bank of Scotland, does not like saying sorry. I’m not surprised though. It was Sir George, as Royal Bank’s ‘executive deputy chairman’, who said in March 2001 that an A£2.5 million bonus he shared with colleagues would not “give you bragging power in a Soho wine bar”. That year Sir George’s bonus was paid at A£814,000 while his chief executive Sir Fred Goodwin’s payout was worth A£759,000. Leopards don’t change their spots. And Sir George hasn’t either.” 1 OCTOBER 2010

NOTES 1 Source: E-motion magazine, January-February 2005 issue.
2 Source: Guardian 22.9.2010.
3 Source: ‘Stagecoach’ by Christian Wolmar.
4 Source: BBC Website.
5 Source: ‘Stagecoach’ by Christian Wolmar.
6 Source: ‘Stagecoach’ by Christian Wolmar.
7 Source: The Herald (Scotland) 5.9.2010.
8 Source: ‘Stagecoach’ by Christian Wolmar.
9 Source: Southern Daily Echo 8.3.1997.
10 Source: ‘Stagecoach’ by Christian Wolmar.
11 Source: Evening Standard 24.4.1997.
12 Source: Bournemouth Daily Echo 27.2.1998.
13 Source: Portsmouth News 5.11.1998.
14 Source: Basingstoke Gazette 2.10.1998 and 9.10.1998.
15 Source: Daily Telegraph 18.3.1999.
16 Source: SWT ‘On Line’ magazine.
17 Source: Southern Daily Echo 31.3.1999.
18 Source: Evening Standard 14.6.2000.
19 Source: Evening Standard 16.3.2000.
20 Source: Evening Standard 5.12.2000.
21 Source: Modern Railways, January 2000.
22 Source: Private Eye.
23 Source: RAIL, Issue 382.
24 Source: Guardian 4/4/2000.
25 Source: The Times 15.2.2000.
26 Source: Rail Professional , May 2001.
27 Source: Evening Standard 2.4.2001.
28 Source: ‘Rail Passenger Franchise Replacement’, January 2000.
29 Source: Southern Sunday Independent 13.1.2002.
30 Source: Evening Standard 11.1.2002.
31 Source: Southern Daily Echo 6.2.2001.
32 Source: Guardian 16.2.2001.
33 Source: Rail Professional, May 2001.
34 Source: Southern Daily Echo 4.9.2001.
35 Source: Evening Standard 6.3.2002.
36 Source: Hansard 21.5.2002.
37 Source: Evening Standard 6.6.2002.
38 Source: Metro 7.6.2002.
39 Source: Evening Standard 25.7.2002.
40 Source: Guardian 24.10.2002.
41 Source: Private Eye.
42 Source: Rail Professional, November 2002.
43 Source: RAIL No. 441.
44 Source: Evening Standard 6.11.2002.
45 Source: Daily Telegraph 23.9.2006.
46 Source: RAIL 11.10.2006.
47 Source: Evening Standard 6.7.2004.
48 Source: Evening Standard 27.6.2007.
49 Source: Evening Standard 24.4.2001 and 10.5.2001.
50 Source: Evening Standard 20.7.2004.
51 Source: Evening Standard 20.1.2004.
52 Source: Evening Standard 12.3.2003.
53 Source: Evening Standard 26.2.2003.
54 Source: Southern Daily Echo 8.8.2003.
55 Source: Evening Standard 8.8.2003.
56 Source: Southern Daily Echo 15.8.2003.
57 Source: Southern Daily Echo 29.12.2001.
58 Source: Southern Daily Echo 25.1.2003.
59 Source: Daily Telegraph 13.11.2004.
60 Source: Evening Standard 14.12.2004.
61 Source: Private Eye.
62 Source: Evening Standard 27.9.2004.
63 Source: Southern Daily Echo 17.3.1998.
64 Source: KATAlogue.
65 Source: E-motion Issue 4.
66 Source: E-motion Issue 13.
67 Source: CD record of the meeting.
68 Source: Evening Standard 22.9.2006.
69 Source: Times 11.6.2009.
70 Source: Herald 24.6.2010.
71 Source: DfT press release 22.9.2006.
72 Source: Evening Standard 2.10.2006.
73 Source: The News, Portsmouth 22.3.2010.
74 Source: DfT press release 22.9.2006.
75 Source: Evening Standard 5.1.2007.
76 Source: Southern Daily Echo 9.5.2007.
77 Source: RAIL Issue 642.
78 Source: E’mail of 19.1.2006.
79 Source: Bournemouth Echo.
80 Source: DfT press release, 22.9.2006.
81 Source: Southern Daily Echo 25.8.2010.
82 Source: Southern Daily Echo 28.4.2009.
83 Source: Evening Standard 24.6.2009 and website.
84 Source: Southern Daily Echo 21.7.2008.
85 Source: Rail News August 2010.
86 Source: Southern Daily Echo 23.6.2007.
87 Source: RAIL, Issue 569.
88 Source: Evening Standard 29.3.2010.
89 Source: Railtalk magazine, Issue 42.
90 Source: Metro 8.7.08
91 Source: Southern Daily Echo 18.9.2008.
92 Source: Today’s Railways, UK edition, November 2008. 93 Source: London Lite 7.10.2009.
94 Source: The News, Portsmouth.
95 Source: Daily Telegraph 6.9.2010 and Southern Daily Echo 7.9.2010.
96 Source: Today’s Railways, UK edition, February 2009.
97 Source: SWT’s August 2010 ‘Webchat’ event.
98 Source: Leaked SWT memorandum.
99 Source: The Herald (Scotland) 29.3.2010.
100 Source: Evening Standard 18.8.2010.
101 Source: RAIL, Issue 648.
102 Source: Daily Telegraph website 23.2.2009.