FirstGroup will no longer run the TransPennine Express rail franchise after 28 May owing to the high level of cancellations and delays, ministers have announced. Instead, the state-owned operator of last resort (OLR) will take control instead.
Who or what is the operator of last resort?
The OLR was set up within the Department for Transport during rail privatisation to provide an emergency alternative should companies fail or breach the terms of their contract.
Since 2018 that entity has been a firm owned by the department called DfT OLR Holdings Ltd, or DOHL. Its board consists of a small number of seasoned rail professionals, many with experience dating back to the days of publicly owned British Rail. Its chief executive is Robin Gisby, who was a senior director at Network Rail before leaving soon after the Christmas 2014 engineering fiasco.
What does it do differently?
For many, the fundamental difference is that all profits are directly paid back to the taxpayer and reinvested, rather than going to shareholders. But generally, at least in the days of franchising and a growing railway, the Conservative government sees it as a stopgap rather than a long-term option.
Will there be new staff?
Normally, the only change is at senior management level, where a small team will step in. As when private firms used to take over franchises, the overwhelming majority of actual employees – and certainly all frontline staff, such as drivers, crew and station staff – remain the same.
In some instances, such as with LNER – the new name given when the OLR took over Virgin East Coast in 2018 – even the managing director has remained in place. However, given the breakdown in industrial relations, wider management changes might be expected at TransPennine Express.
Who else does the OLR control and why?
It runs LNER, Northern and Southeastern. It took over the east coast line for a second time in 2018 when Virgin said its losses were too great to continue operating, having already stepped in successfully from 2009-15 when National Express handed back the keys in similar circumstances.
The OLR took over Northern trains in 2020, when the service was on the brink of operational and financial collapse just before Covid struck – a moment that saw the government rip up rail franchises rather than take over the entire system directly, issuing new contracts to other private firms.
Southeastern was taken over in 2021 in very different circumstances, when the government uncovered long-term financial mismanagement – referred to the Serious Fraud Office – at the Go-Ahead-owned firm. Last year Go-Ahead set aside about £80m to cover fines arising from the accounting scandal.
Have performances improved under the OLR?
Sometimes, yes: proponents of nationalisation say less money is sucked out of the system to shareholders (let alone fraud), and unions and staff appear to have had less poisonous relations with senior managers. LNER appears to have had more flexibility than other firms in recent years to trial innovations such as ticketing changes.
In the case of TransPennine Express, while ministers have said the move is “no silver bullet”, they and others hope that a “reset” will help industrial relations and ease the path to rest-day working, which would significantly improve services.
Which rail networks could be next?
The most obvious contender would be Avanti West Coast, another FirstGroup-owned operator, which has twice been given short contract extensions since last autumn. It was warned to improve services after cutting its schedules last summer amid a similar record of cancellations and delay, although it has since performed markedly better than TransPennine Express.
Labour has promised to bring all passenger train operations into state hands when future contracts lapse, should it come to power in the next general election.
