A New Franchise

The Department now expects the new franchise to commence during 2013. The term of the franchise will be decided before issue of the Invitation to Tender, but, the minimum term is expected to be at least ten years.

The contract may include provisions that would allow the Department to terminate the contract earlier if the franchisee fails to deliver an agreed level of performance for passengers. Several industry parties and other commentators have advanced the view that longer franchises would be beneficial, for example by encouraging a greater level of investment by the franchisee. The Department for Transport has said it will consider, through the procurement of the franchise, the benefits of extending the length of the franchise beyond ten years in return for significant investment by the franchisee.

The specification for the new franchise will be informed by research from Passenger Focus and by other studies, including Network Rail's East Coast Main Line Route Utilisation Strategy and the relevant Department of Transport Regional Planning Assessments.

In May 2011, the Government said: "inflation busting rises in rail fares could become a thing of the past if the £1bn annual cost savings in the railways envisaged by the McNulty Report are achieved." Responding to Sir Roy McNulty's independent Rail Value for Money study, the Transport Secretary Philip Hammond welcomed the report and emphasised the need to reduce the cost of the railways.

Philip Hammond said: "He warned that unless we get a grip and cut the costs of our railways, passengers could see services cut and fares rise. But, if we seize this opportunity, work together, and push through real reform in our railways we will be able to make savings for both taxpayers and fare payers.

The Department is expected to provide further details about its plans for rail franchising in the near future.