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1  All across the Great Western territory / Fare's Fair / Re: "More trains less strain" encouraging people to break the law? on: September 20, 2007, 22:42:49
...they got exactly what they were looking for and that was nationwide press coverage.

I agree, Timmer, they did get a lot of publicity which was a bonus for them.

However, I personally believe that their whole approach is unconstructive. It generates a lot of heat and light but it really doesn’t move things forward. MTLS (More Train Less Strain) is overtly political and their objective of having the railway renationalised is little more than a decisional fantasy which no one really takes seriously. Moreover, they are overly aggressive in their approach which wins them few friends in the industry. On the plus side, they do raise the profile of the issues which, undoubtedly, helps other groups.

In my view, a reasonable approach, like Graham Ellis’, where you have a clear objective, are firm about what you want but yet engage in constructive dialogue with various parties, wins far more respect.

Softly, softly catchy monkey!
2  All across the Great Western territory / Fare's Fair / Re: "More trains less strain" encouraging people to break the law? on: September 20, 2007, 22:33:57
While I absolutely support MTLS (More Train Less Strain)^s right to protest, complain and lobby for a better service I have no hesitation in condemning, outright, either breaking the law or encouraging others to do so. People do not have a right to simply go around doing as they please. If we all did that the result would be total anarchy.

It is illegal, for good reason, to deliberately evade paying a fare for train travel. Refusing to pay, no matter how much you dislike the service, is a criminal act. And just because train travel is an intangible service, as opposed to a tangible product, does not mean such action is morally justified. It isn^t. It is exactly the same as having some grievance against Marks & Spencer and walking into their stores, taking good off the shelf and walking out without paying for them ^ something very few people would dream of doing.

My suggestion to people who want to protest is to buy a ticket as normal but show the protest ticket to gate staff and on train staff first. If you are then asked for a proper ticket, produce that. That way you are both making your point and remaining fully within the law.
3  All across the Great Western territory / Who's who on Western railways / Re: Alison Forster gone from friday? on: September 18, 2007, 22:37:10
Actually this is very confusing. The original Points West report claims that Alison is being moved within FGW (First Great Western) whereas the BBC» (British Broadcasting Corporation - home page) site says she is moving to First Group.

In any case, Alison has been made a scapegoat. The problems with this franchise were not of her causing and her removal will not remedy them.

http://firstgreatwestern.blogspot.com/2007/09/all-change.html
4  All across the Great Western territory / Smoke and Mirrors / Re: 158 Merry-go-round on: May 12, 2007, 10:13:46
The point about the wider costs of the Greater Western infrastructure could be true. My gut feeling ^ and it is no more than that as I have not properly analysed the figures ^ is that if the system was organised in a commercially viable manner (i.e. longer franchise terms, vertical integration, etc.) then Greater Western would, as a whole, be a financially viable business. That does not mean to say, of course, that some reorganisation of the network would not be required. I think it would.

The system is the critical element in this. The way in which the railway is organised at the moment is not a particularly sensible commercial solution; it is certainly not the way that the business would be structured if it had been created by natural market forces rather than by government intervention. I have written quite extensively about this on my blog, so I won^t repeat the whole argument here. However, the most critical thing is that the short term nature of the railway limits capital investment because there isn^t sufficient time for a return to be made on that investment. This reduces what we have called the ^pot of cash^ available to the railway as a whole and means it is more reliant on government investment (or subsidy) than it otherwise would be. Rail is a long term game because it is a capitally intensive industry, but it is organised in a system which is short term by its very nature.

This is an argument which goes far wider than Greater Western; it applies to all franchises. The question is, how many franchises, if they were organised differently, would suddenly become profitable? I don^t know the answer, but I suspect that at least some would see a change in their financial status. For example, at the moment train leasing costs come straight off the bottom line. If franchises were longer (or permanent) then there would be more incentive for TOCs (Train Operating Company) to own their own rolling stock. This would mean that stock would be classed as an asset and only the depreciation costs would come off the balance sheet. Alternatively, finance leases could be used which would have a similar impact as they have a different financial treatment to operating leases which are the ones most commonly used today. Another example would be the use of assets. If there was vertical integration then I have no doubt that the railway companies could sweat their assets far more than they currently do. Stations, for example, are areas of prime footfall. They are, therefore, ideal for commercial development which would yield returns to their owners. This ^sweating^ doesn^t happen at the moment because most TOCs lease stations from Network Rail, so there is no incentive for them to implement extensive development programmes.

So, if some of the franchises could be financially restructured then that would reduce the overall subsidy required for the rail network. If course, it is likely that some subsidy may well remain. It^s fine to ask ^where will this come from?^ but, surely, the first question to ask is: should this be given? Appreciably this is a very wide question incorporating matters of political philosophy (the principles on which you believe a country should be run) and economics (the most effective way of organising the economy).

My personal answer is that no, subsidy should not be given. Subsidy, where it is granted in any industry, is a method of penalising the successful and efficient to prop up the inefficient and unsuccessful. Moreover, it is highly injurious to the natural mechanism of the market which, if left unhampered, operates in the best interest of consumers.

Take Greater Western as a case in point. If GW (Great Western) is financially viable and profitable then it should be left alone. Surplus capital (profit) can be invested back into the business to support growth in demand or, alternatively, can be put to other uses elsewhere. If the government takes money from GW to give to some other railway operation the impact is that that surplus capital is not flowing to an area where it can be put to productive use ^ i.e. where there is a natural demand for it. It is flowing to an operation which will not generate a return because, financially, it is simply not viable. The capital gets absorbed, no return is generated so there is no new surplus and, as a result, the economy as a whole is poorer. In other words, the capital seed has been consumed, and not invested.

GW is also poorer because it now has less money to invest back in its own services. This in turn can lead to a stunted level of investment which then leads to other problems. In practical terms what could happen, for example, is that GW suffers overcrowding because although demand is growing it doesn^t have the capital to buy new carriages; that capital has gone to some other operation where demand, in reality, is not great enough to sustain a rail service. So, resources have been misallocated against the stated preferences of consumers.

The other consideration is that rail, where it is subsidised, can have a crowding out effect on other services. For example, a subsidised rail service may mean there is a much lower incentive for more, better or faster bus services. Remove the rail service and other forms of transport will increase and improve.

At the end of the day, subsidy creates more problems than it solves. It is an extremely inefficient way to run an economy and, ultimately, to satisfy consumer demand. This, of course, is a much wider debate but it does have a very practical implication for the rail industry.
5  All across the Great Western territory / Across the West / Re: First got it wrong admits Transport Minister on: May 12, 2007, 09:20:33
I don^t think it matters one iota what Mr Harris says. Most people I speak to know the truth: namely that many of the problems have been caused by his Department and its meddlesome and bungling ways. Even if First did underestimate capacity ^ which I don^t believe it did because the Department effectively built in capacity cuts to the franchise specification ^ then Mr Harris^ Department endorsed that underestimation when they awarded them the contract. So, they have only themselves to blame.

Yes, First Great Western did get things wrong at the start of the franchise and they could have done things better, but the underlying issues come from the Department and the way in which it organises and runs our rail system. As such, Mr Harris^ categorical refusal to accept any responsibility is disgraceful. His inability to see the wider picture and start to explore ways of how the rail network can be improved by changing the structure and systems is negligent.

The bottom line is this. We simply should not have politicians getting involved with the running of the rail network. They don^t know what they^re doing and they act in ignorance of the situation on the ground. And, when their mistakes cause problems they simply pass the buck to someone else. This, unfortunately, is not unique to Mr Harris or the DfT» (Department for Transport - about) - it is a symptom of government as a whole, and of this current administration in particular.
6  All across the Great Western territory / Smoke and Mirrors / Re: 158 Merry-go-round on: May 10, 2007, 23:08:12
We all pay in the end, so it is a matter of trade offs between competing demands for a finite pot of cash (or increased subsidy through taxation).

I want to address this point separately.

The pot of cash, so to speak, is limited because of the system.

Most private companies have very little difficulty in finding enough cash to expand and grow, even when this cannot come from their own internal reserves. The reason for this is because capital in the economy will flow to where it can make a return: provided a new venture appears profitable, there will be investors willing to fund it.

Despite the fact that many franchises are profitable and growing, the railways do not work in this way; and Greater Western is good a case in point. Capital does not flow to the railways as it could because of several reasons. First, many of the franchise periods are too short for a return to be made on large capital projects. Second, the government intervenes far too much which makes investment an unattractive option. Third, the government wants to use the railways as a cash cow to generate money for the state which stunts the level of return that can be made.

If you want to expand the railway then get government out of the equation. Make franchises longer and let TOCs (Train Operating Company) make more profit. I know people will often criticise profits. But where do you think expansion comes from? It can only come from surplus capital which can only be generated by making a profit. No profit, no surplus, no reason for investors to invest capital, no expansion, no growth.

It is no coincidence that most businesses run without unnecessary government interference are perfectly successful and, by and large, deliver on the needs of their customer, whereas most functions that are run or overseen by government are exceptionally bad value for money in that they cost a great deal and deliver a poor standard of service.
7  All across the Great Western territory / Smoke and Mirrors / Re: 158 Merry-go-round on: May 10, 2007, 22:50:57
Presumably the "DafT" means government funding, i.e. the taxpayer. We all pay in the end, so it is a matter of trade offs between competing demands for a finite pot of cash (or increased subsidy through taxation). This is interesting, because we all believe that our own train service is the most demanding of public subsidy, especially if we have to put up with crowded trains or road congestion. Yet from my perspective as an FGW (First Great Western) commuter into central London, I suffer far less misery than my colleagues who use the underground or commuter services into Waterloo, Cannon Street etc. So we get into the debate as to who is more worthy of direct or cross subsidy from a general economic perspective. The reality is that some of us will pay one way or another - Discuss!

It^s not a matter of government providing subsidy. Indeed, the Greater Western franchise does not need subsidy ^ as a whole, it is profitable and financially viable.

The reason I advocate DafT paying for the class 180s is very simple. First Great Western are paying them well over a billion pounds to run the franchise. This is money that comes from us, the fare paying public; it is, in many ways, a stealth tax on rail travel in our region. I want my money to be used to better the rail services I use.

As a consequence of the amount FGW have to pay, they are financially restricted as to what they can do in regards to additional capacity ^ and this is exacerbated by the short nature of the franchise period. They can^t for example, take on significant additional leasing costs without it have an adverse impact on their financial performance. That only leaves DafT as a source of funding.

But be clear, this is not asking DafT for money. It is asking DafT to allow FGW to keep more of the money we give them on the condition it is spent on additional capacity. It may be a subtle distinction, but this isn^t subsidy.
8  All across the Great Western territory / Smoke and Mirrors / Re: 158 Merry-go-round on: May 01, 2007, 22:44:32
They saw what was coming but there was no way First were gonna walk away from Great Western and have they done a GNER (Great North Eastern Railways) and bid at any cost?Huh The one major difference is FGW (First Great Western) is backed by a much more stable empire in First than GNER was in having Sea Containers. If that company was not in the mess that it was, it would have been able to keep GNER, allbeit at an almost certain loss, but thats way off topic.

No, I don't think they have done a GNER.

The financials for Greater Western are challenging but they do stack up even with reasonably conservative growth estimates. Financially, GNER was a different case altogether. They put in an overly ambitious bid on near impossible growth targets with no margin for error. The premium payment phasing was wrong and the financial flexibility of the franchise - i.e. the amount of financial engineering they could do - was minimal. It only took one or two adverse things to push them over the edge and with a weak parent company they had absolutely nothing to fall back on.

The thing that gets me is how DafT did not recognise the weaknesses in their original bid. Actually I do understand it, they saw pound signs and all logic went out of the window...
9  All across the Great Western territory / Smoke and Mirrors / Re: 158 Merry-go-round on: May 01, 2007, 22:34:00
As far as I am concerned the DafT (I shall use this from now on  Grin) should jolly well pay for the class 180s to stay on the Great Western network. They are being given ^1bn+ of money by First - that's money that comes from us, the fare paying public. Personally I expect something in return for what is, in effect, a tax on rail travel. What I do not expect is for large proportions of the money paid by FGW (First Great Western) passengers to be diverted to other franchises (i.e. ones that run through areas where there are many Labour MPs (Member of Parliament)) or to be wasted on nonsense schemes that DafT wants to pursue.

We keep hearing about these 1,000 carriages which are supposed to materialise at some unspecified point in the dim and distant future. That's jam tomorrow. Funding for the class 180s to be kept with FGW is something that could make life better today.

It would, of course, be an absolute scandal if the 180s went into storage when there was massive overcrowding. And it would make DafT even more of a laughing stock than they already are.
10  All across the Great Western territory / Smoke and Mirrors / Re: It's Cash First And Passengers Second on: February 24, 2007, 14:28:15
Quote
(from the letter)
Your correspondent, Mick Stanley (Letters, February 1), has hit the nail on the head in saying that the recent December timetable instigated by First Great Western is based on shareholder satisfaction rather than that of its customers.

It is inaccurate to suggest that the December timetable was instigated by First. It wasn^t. The Department for Transport instigated the changes.

I also take issue with the, albeit thinly veiled and indirect, suggestion that it isn^t possible for a private company with shareholders to run a good railway service. This is an oft repeated statement and one that is a total fallacy.

Over the longer term, a private company has got to deliver a steady and continuous growth in profits to satisfy both shareholders and the City. It is only possible to delivery such growth by satisfying customers. Cutting costs to the detriment of customer service certainly delivers a short term profits boost, but it doesn^t deliver sustainable growth ^ if only because existing customers eventually desert the service and it becomes increasingly difficulty to attract new ones because of a poor reputation. The ultimate consequence of such a position is that it becomes very hard to grow the top line (or revenues) and having already undertaken a cost cutting exercise the company has nowhere to turn to grow the bottom line or profits. And that is precisely why no sensible private company looks after shareholders to the detriment of customers.

When properly managed, cost cutting does, of course, have a part to play. And so it should: it makes things cheaper for customers and provides more money for future investment as well as allowing a better return for shareholders who, incidentally, are one of the sources for future capital investment. But it isn't the engine of growth of most private organisations.

I accept that today^s railway is run on a short term basis and this is, indeed, one of the central causes of many of the current problems. But the short term nature is not a problem caused by private businesses it is a political problem brought about by an unsound franchising structure and a government that refuses to provide any long term strategic direction.
11  All across the Great Western territory / Introductions and chat / Re: Graham Ellis - Welcome to the First Great Western coffee shop on: February 04, 2007, 22:42:35
Graham,

Are you the guy featured in this week's Wiltshire Times? We always get it at school and I don't usually read it but, for some reason, I did today and I saw a piece on the petition and, I think, this website. If you are, well done - it's really great publicity!

CJ
12  All across the Great Western territory / Smoke and Mirrors / Re: Unrealistic Franchise Bid Leads To Fiasco on: February 04, 2007, 22:39:54
Hi Lee

It does not surprise me that bus services were included in the HRAT - after all, I am sure there are places where they may well be cheaper. My take on it is that this is a rail franchise, not a bus franchise and, as such, it should concentrate on the running of rail services not buses.

If the rolling stock situation - i.e. the unfair relationship between the leasing companies and the train operating companies - was sorted out, it may well be profitable to run services even on lines where passenger traffic was relatively scarce. The way the whole rail network is set up at the moment, it is not surprising that it is unprofitable to run services on many routes.

In short, I don't think running buses is the answer. Sorting out many of the problems with the nature of franchising is the answer.

CJ
13  All across the Great Western territory / Smoke and Mirrors / Re: Who is to blame? on: February 04, 2007, 09:41:46
Hi Grahame, thanks for the welcome!

I can see your point. I do believe, however, that the franchising process is at fault. The way the government sets the parameters ^ to deliver maximum revenue at the very minimum of cost but with little scope for innovation or long term investment ^ naturally results in cuts and poor service.

There is some scope for negotiation, and I am sure First did enter into some. There is no way we would be privy to this, of course, but it is probable that the service we have now is actually better than that the Department first specified: we know from the initial invitation to tender that the government wanted to cut the sleeper services and reduce services to Cardiff, for example. However, in a competitive bidding environment ^ where each company is understandably desperate to win ^ negotiation is, by is very nature, limited. This is especially so as the power of government is ultimate, it^s not like negotiating with another commercial company where they also have to consider things such as public reaction and brand equity ^ the government doesn^t bother about such things.

Yes, it is true that, at the end of the day, First accepted the contract. They could have turned round and say, no thanks. But that, commercially, is almost impossible. How would they have justified it to shareholders? In any case, it wouldn^t have changed the situation we have now: no matter who won the contract, they would still be dealing with all of the present issues. For me, the bottom line is this: the government is the contract manager and owner. It has complete and unfettered power to change things, to specify new trains, to charge franchisees less so they have more money to invest and so forth. The train operating companies are only contract providers who have to, ultimately, abide by the wishes of the government.

Finally, thanks for looking at my blog. So long as you credit me - and a link to the blog would be nice ;-) - please feel free to copy bits from it as you wish.
14  All across the Great Western territory / Smoke and Mirrors / Re: Unrealistic Franchise Bid Leads To Fiasco on: February 04, 2007, 09:26:44
Hi

I think this, and therefore Christian^s article, misses two critical points.

Firstly, First Group didn^t just submit one bid to the Department for Transport; none of the bidders did. Each had to submit a minimum of two tenders and, possibly three if they chose to do so:

1. Base Case Tender (BCT): this is compulsory and is the only tender on which bidders are assessed and, ultimately, chosen. The government (the Strategic Rail Authority in this instance as it was still in existence when the franchise first went out to tender) sets the specifications for the base case ^ the train operating companies have virtually no input whatsoever. From the outset, the base case which was based on Service Level Commitment 2 (SLC2) always had anomalies and cuts. In other words, it was the government that built the cuts into the franchising process and made companies bid against it.

2. High Return Alternative Tender (HRAT): again, this is compulsory but bidders are not assessed on this. The HRAT is a submission where bidders need to meet overall franchise objectives but must do so in a way that cuts costs and delivers maximum returns to the government. Companies are actively encouraged to make cuts, within reason, and can make changes to the SLC2 and the timetable.

3. Alternative Tender (AT): this is optional. Bidders have a free hand and can make a case for delivering a premium service and for adding capacity. Again, bidders are not assessed on this.

The ultimate franchise agreement awarded to First is, most likely, a hybrid of the three submissions. However, what is clear from this is that, apart from being incredibly stupid, the franchising specification always had cuts built into it: companies were forced to put cuts into their bids.

The second point stems from this. Yes, First did opt to bid and did so knowing that there were cuts in the franchise. However, what were they supposed to do? Walk always and let some other company get the franchise? Commercially that would have been suicide. In any case, no matter who won the franchise we would still be in the position we are now simply because the government specified, from day one, the type of service it wanted.

It is ludicrous to blame First when the government:

1. Set the parameters of the franchising process
2. Set the base level specification including levels of service
3. Required bidders to maximize revenue for the DfT» (Department for Transport - about)
4. Ultimately chose the bidder and set the franchise specification

First, like any train operating company is simply a victim of a badly designed system which stresses revenue generation for the government over service to passengers.
15  All across the Great Western territory / Smoke and Mirrors / Who is to blame? on: February 03, 2007, 20:25:23
It is all very well to complain about First Great Western, however, the company is categorically not to blame for the timetable changes made in December 2006 ^ it was the Department for Transport which made those modifications and then built them into the franchise specification. While First Great Western has a degree of input into the timetable planning process, at the end of the day it is a supplier to the DfT» (Department for Transport - about) and has to abide by the wishes of the government.

It is also untrue that FGW (First Great Western) can simply add services to the existing timetable without the Department^s say so: the Department for Transport has to issue derogations for every alteration and deviation to the specified timetable. Moreover, since First has to pay back an enormous sum of money for running the franchise it has to make sure the services it does run are economical. In other words, even with the permission of the Department it has to make sure services pay for themselves. Again, the financials come down to the government which could have opted for a franchise specification which charged a lower premium to the train operating company and made more allowance for additional capacity. It didn^t, it opted for the specification we have now.

I am not an apologist for First and I think, as they themselves readily admit, there are things they could have done better ^ especially on the engineering and maintenance side where they are responsible. However, I find it a gross injustice that having messed around with the timetable, the Department for Transport are now denying any culpability and are seeking to place the blame at First Great Western^s door. It^s an out and out lie and it^s unfair to First Great Western, its staff, it shareholders and, ultimately, its customers.

For those interested, I have written more on my blog: http://firstgreatwestern.blogspot.com/
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