An article in Private Eye highlights the bizarre thinking behind the rail franchising system - a system that supposedly ensures that the profits of train companies are not ring fenced. You may remember that National Express Group (NX) won the East Coast mainline franchise in 2007 by making unrealistic assumptions about growth. Instead of suffering the financial consequences of its recklessness NX dumped the business on tax payers in November 2009. Labour ministers at the time had said that any firm handing back a franchise would lose its other franchises by "cross default". This sounded good but proved to be, in the words of Private Eye, piffle. NX was not stripped of its two remaining franchises - C2C and National Express East Anglia (NXEA) - both of which are profitable. In the case of NXEA, the profits are enhanced by 'revenue support' i.e millions in tax payers' money.
Following on from the handing back of the East Coast franchise, NX UK rail profits rose by 544 percent in the first six months of 2010 and now the government has extended both C2C and NXEA franchises.
As Private Eye says, the lesson for future franchise bidders is clear: bid recklessly to win because franchising guarantees big, risk free rewards.
So, a 544% increase in profits? Something to bear in mind next time you purchase a ticket to travel on your filthy, overcrowded and more than likely, late train.
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