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Theresa May prepares UK rail franchising shake-up

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Theresa May prepares UK rail franchising shake-up

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UK politics & policy

Theresa May prepares UK rail franchising shake-up

PM seeks to improve the railways without abandoning the use of private operators

Labour plans to nationalise the entire rail system © Alan Keith Beastall/Alamy

Theresa May is drawing up plans for what Downing Street is billing as the biggest review of the UK’s rail franchising system since the 1990s privatisation in the wake of the collapse of the East Coast main line earlier this year.

The prime minister is understood to have authorised a major review — likely to be headed by an external figurehead — to examine how to improve the railways without abandoning the use of private operators. The consultation is expected to last until well into 2019.

The plan was raised in a meeting at Number 10 on Tuesday morning hosted by Gavin Barwell, Mrs May’s chief of staff, and attended by ministers from various departments. One person familiar with the situation said the plan was being driven by Chris Grayling, transport secretary, with the authorisation of Downing Street.

Mr Barwell also said at Tuesday’s meeting that the government would take action on rail fares as soon as possible, an official said.

However, the review still needs approval from the Treasury, which is not entirely supportive.

The proposals would be the second major review of the franchise system in five years. The government-commissioned “Brown Review”, triggered by problems with the West Coast franchise, reported in 2013 that the system was “not fundamentally flawed”.

That conclusion was jolted in May when the government was forced to take back control of the East Coast franchise after it collapsed for the third time in 12 years — prompting fears that other operators could walk away from contracts.

The opposition Labour party plans to nationalise the entire rail system, although the 25 private franchises would only return to public hands as they come up for tender.

Number 10 will not countenance following suit, although it is understood to be otherwise open-minded about the review. A Department for Transport official confirmed the plan was “being looked at” but declined to comment further.

Stagecoach and Virgin Group had only been operating the London to Scotland line for two years when they breached a key financial covenant.

Mr Grayling originally supported an alternative plan that would have allowed the two private companies to keep running the line under a management contract. Instead he stripped them of their contract five years before it was due to end, in part because of Number 10’s fears about a potential public backlash.

The government had run the line from 2009 to 2015 after a previous operator, National Express, walked away from the contract.

Mrs May has also expressed frustration about mass delays and cancellations of rail services across the country in June following the botched introduction of new timetables, describing the disruption as “absolutely unacceptable”.

Meanwhile the public accounts committee of MPs issued a report in April warning that the rail franchising system was “broken” at the expense of customers. The PAC accused the DfT of failing to learn the lessons from previous failures when it allowed Stagecoach and Virgin to overbid for East Coast.

The May government has already sought to overhaul the railways by trying to bring the running of trains and track much closer.

Under those reforms, announced at the end of 2017, there will be greater collaboration between private train operators and state-owned Network Rail, which maintains infrastructure, in an effort to make services more reliable.

The rail industry has said it would prefer power and responsibility to be devolved to regional “routes”, potentially with concessions lasting two or three decades, rather than franchises for seven years, allowing for long-term investment.

The railways were first privatised by the John Major government in 1994, when the track was spun off into the now defunct Railtrack and train operating companies competed to run the trains. Network Rail, which took over from Railtrack, was subsequently renationalised.

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