Minister seeks rail reforms for 'leaner, fitter' industry

Plans for rail industry reform, including longer franchises and a driving down in costs, were outlined yesterday by Transport Secretary Philip Hammond.

His announcement followed the publication of a Whitehall-commissioned interim report which showed that the railways were costing more than they used to and more than they ought to.

Report author Sir Roy McNulty said greater efficiency would realise savings of 600m to 1bn a year by 2018/19 without cutting services or lowering quality.

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With Sir Roy's final report due in April 2011, Mr Hammond said yesterday that he was setting up, and chairing, a "high-level group" to look at ways of driving down costs and to consider structural reform in the rail industry.

Mr Hammond also announced future franchise plans. He said that in 2012 he planned to award a 14-year franchise for the West Coast Main Line and a 15-year franchise for the East Coast Main Line.

He also said that he was proposing a short contract, to run from next year until 2013, to run the Greater Anglia franchise currently being operated by transport company National Express.

A new, long-term franchise, to last at least 15 years, to operate services in East Anglia would then be awarded to start in 2013.

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Mr Hammond also said that the TransPennine Express franchise could either be extended by up to five years from 2012 or possibly re-tendered for at least 15 years, possibly in 2013, alongside the Northern franchise.

He said the Greater Western franchise would be re-tendered in either 2013 or 2016, for at least 15 years.

There will be short-term, interim franchises for the Thameslink and South Eastern franchises due to the work going on at London Bridge station for the Thameslink project.

Longer-term franchises to cover the Thameslink and South Eastern routes will be awarded once the London Bridge work is completed later this decade.

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Network Rail chairman Rick Haythornthwaite welcomed Mr Hammond's statement and said his company was looking forward to working with the Government and Sir Roy on the next phase of the value-for-money study.

He went on: "We fully support a change in direction for the industry with closer partnerships with operators with better alignment of incentives, different solutions for different franchises and a continued need to drive out further costs in the industry.

"The company is keen to make early progress towards closer working relationships with operators so that we can focus together on further improving services for passengers and freight users and reducing the cost to the taxpayer."

Final proposals for industry reform will be published by November 2011.

Office of Rail Regulation chief executive Bill Emery said Sir Roy's interim report "indicates there is scope to significantly reduce costs across the entire rail industry."