Mark Leftly: No point reversing to the 1990s on rail franchising if the model is so flawed

Outlook Ah, the 1990s… MC Hammer, puffa jackets, grunge, Gazza's tears, This Life, the private finance initiative, negative equity, high interest rates and John Major desperately clinging on to his premiership.

Why on earth the Coalition is determined to take us back to those years I don't know, but determined it is.

This is best demonstrated by David Cameron's decision to split the nation asunder with a referendum on Europe, pandering to the right-wing of his party and opening up a complicated debate on the incredibly simplistic terms that so (badly) informed the political rhetoric of the John Major years.

However, as Europhiles unsubtly hint that those who want out of the EU are jingoistic, while the sceptics depict pro-Europeans as unpatriotic surrender monkeys, the real time travel might actually be taking place in the Department for Transport.

The department's permanent secretary, Philip Rutnam, is understood to have handed secretary of state Patrick McLoughlin a proposal outlining how to overhaul rail franchising in the wake of the West Coast Mainline debacle.

As a quick reminder, that saw FirstGroup beat Virgin to the contract, only for the government to terminate the selection process at a cost of £40m when it discovered that civil servants hadn't done their sums correctly.

Few know what Mr Rutnam has suggested, but there is a growing sense that he might be advocating the re-establishment of some form of Office of Passenger Rail Franchising.

The Transport Select Committee is already pushing for the return of this arm's length body, with the argument that it would bring greater commercial expertise and ensure that there is no repeat of West Coast, an experience that nearly saw the government sued by Virgin boss Sir Richard Branson.

This office was a big feature of the 1990s privatisation of the railways, with director John O'Brien famously selling 25 franchises in less than two years ahead of Labour's election victory in 1997.

Then Transport Secretary John Prescott had vowed to get rid of the office in an attempt to overturn what he saw as the sharper edges of privatisation, eventually succeeding in getting franchising rolled into the Strategic Rail Authority.

Eventually franchise decisions ended up back in the department and now wresting control from civil servants who have never worked in the business world is exactly the right response to West Coast, according to several industry figures I've spoken to.

Others, though, might call this passing the buck, ensuring that mandarins can never again be blamed for making miscalculations which are based on a deeply flawed model that sees train operators forecast profit and passenger numbers 10 or 15 years into the future.

Even the most gifted of Mayan psychics could not have foretold the events that could impact those numbers.

Just look at Channel Tunnel Rail Link builder London & Continental Railways, which nearly went bust in the 1990s partly because its initial revenue forecasts couldn't possibly have accounted for the emergence and impact of low-cost airlines.

The right start for franchising reform is not pushing decisions elsewhere, but accepting that the rail franchising system is based on figures that might as well have been plucked out of the air, if they haven't been already.

There's no point trying to re-establish a sepia-tinged 1990s if the building blocks of rail franchising – and, for that matter, Europe – are not restructured first.

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