Comment: Open access operations - is the government for or against?

The privatised train companies made a mistake by taking a hardline in relation to Labour’s plans to bring operations back into the government fold.

Rail Partners, set up by a consortium of various private rail interests, took a particularly aggressive line towards the plan, with chief executive Andy Bagnall even attending the Labour Party conference to argue the case that the policy should be reversed.

There was never any chance of that, and the organisation will be sent to that scrapyard in the sky to join the likes of Connex, Sea Containers, and numerous other such rail companies.

FirstGroup, a bit cannier than some of the others, has seen the way the wind is blowing with the demise of franchising, and has put its eggs in the open access basket.

Indeed, quite a lot of eggs - some £500 million worth. In December, FirstGroup announced it was buying 14 five-carriage trains from Hitachi to use both on its existing open access services and on a new one between Paddington and Carmarthen.

FirstGroup and other potential open access players have been spurred on by Labour’s manifesto which, while making explicit the renationalisation of operations, was encouraging about the maintenance - and indeed the expansion - of open access services.

Indeed, Labour’s transport plans, published in April 2024, commended existing operators and explained: “Open access has an important role within the rail system… [and has] a proven track record in driving competition and better passenger outcomes.”

Given what the company perceived as the favourable climate for open access, as set out in this document, FirstGroup has been rather taken aback (“miffed”, as one senior manager put it) that new Transport Secretary Heidi Alexander has poured an iceberg full of cold water on the concept.

In an unprompted letter sent in early January to the regulator, the Office of Rail and Road, her welcome for open access is lukewarm. And she puts great stress on the need to be aware of the downsides.

She wrote: “We need to be mindful of the impacts of open access, such as the level of revenue they can abstract from contracted services and the associated implications for passengers and taxpayers.

“I am also aware of the additional pressures new services can create on already constrained network capacity and their impact on the value secured from public investment in infrastructure.”

This highlights two clear objections which have long been obvious: that more open access will result in less income for the new nationalised Great British Railways; and that cramming more trains onto the spare paths available will put pressure on the performance of the network, something that the government is determined to improve.

Now, this does not mean the rules have changed. Or at least not yet!

But it does raise doubts about Labour’s enthusiasm for open access. And apart from changes to the regulator’s role which Labour could well introduce, such as removing its focus on ‘increasing competition’, there are other ways of making life difficult for open access operators, such as removing the hidden subsidies which enable them to operate.

It was notable that Alexander stressed that only one open access operator contributed to fixed cost on the network - clearly a hint that this may change in the future.

This is the difference between being in opposition and being in government. It was all too easy for Alexander’s predecessor, Louise Haigh, to extol the virtues of open access when in opposition. But when in power, ministers have learnt that there is a fundamental contradiction between having the best possible timetable and allowing a free-for-all on the railways.

Jonathan Tyler, an expert on timetabling, has long argued that open access is incompatible with efficiency.

He says: “Open access is incompatible with the government’s vision of integrated public transport, including a publicly owned railway managed by a single directing mind.”

In particular, he questions whether the ability of ORR to allow open access operations without regard for the availability of capacity on the railway will lead to inefficiencies. Having more open access operators would, he suggests, add to the already far too complicated ticketing system on the railways.

FirstGroup is therefore left in a bit of a quandary.

In one of several ironies in this story, FirstGroup’s Great Western Railway originally opposed the application by Grand Union Trains to run five daily services between Paddington and Carmarthen.

Despite GWR’s objections, ORR agreed to the introduction of these services. In a letter explaining this decision in December 2022, ORR Director of Strategy, Policy and Reform Stephanie Tobyn stressed: “ORR is supportive in principle of open access, by which we mean passenger services provided outside of a public service contract.

“This reflects our duty to promote competition for the benefit of rail users and our recognition that competition can make a significant contribution to innovation in terms of the routes served, ticketing practices, and service quality improvements…”

However, we are now in a very different situation. Firstly GWR, behaving rather like a Victorian railway company wishing to snuff out a smaller rival, bought the rights to the Welsh open access operation from Grand Union, which obviously rather undermined Tobyn’s point about how the new services would provide competition.

However, GWR is due to be folded into the Department for Transport’s operations, along with other franchises.

The current contract doesn’t end until the summer of 2028, but the Department announced recently that all the franchises would be taken in by October 2027. So, FirstGroup will become the open access rival to the operations that will be run by the state-owned Great British Railways.

Where this leaves FirstGroup is unclear. It is buying the Hitachi trains through Angel Trains, the rolling stock company, which will bear the long-term risk of ownership. But FirstGroup will be responsible for ensuring leasing costs for several years.

On the plus side, these are five-car bi-mode trains which will be flexible and usable on other parts of the network.

But nevertheless, if the Carmarthen services never materialise FirstGroup, which has said it would like to triple its income from open access operations, could be left with considerable losses.