Operator of Last Resort

Operator of Last Resort

6 September 2023

RMT Press Office:

Transport Select Committee September 6, 2023

At the Transport Select Committee, the government was pressed by Gavin Newlands MP and Mike Amesbury MP on whether it was going to re-privatise the contracts it’s taken over through the Operator of Last Resort. 

Rail Minister, Huw Merriman, confirmed that while it is the intention to do so, there were no immediate plans as ‘it will take some time’, and it admits it thinks the OLR is running its franchises very well:  ‘the performance across their stable across every single one of their four operators has gone up if you look at June/July’s performance’.


This is better news for passengers, but very bad news for the TOCs lobbying group Rail Partners who were quoted recently urging the government to set out a “timeline for letting new contracts, including those with the operator of last resort.” 

And bad news for First Group, who depend on rail for 80% of their revenue, recently said they were urging the government to “finalise the form new Passenger Service Contracts will take and setting out a timeline and framework for bringing those contracts to markets, including those currently operated by the public sector.”

https://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/reports-and-presentations/reports/firstgroup-annual-report-2023.pdf p26


In this segment, Operator of Last Resort CEO Robin Gisby explained why the public sector franchises might be working better than the private sector ones: ‘We don’t have a shortened timeframe that a franchise has, we don’t have to try to make a return on investment over the franchise life’ – we try to do the right thing for the long-term because railways are long-term” - ‘We run these railways on behalf of the passengers and communities we serve’.


And Robin Gisby also noted that OLR can’t innovate around efficiencies that could be achieved by integration because it’s stuck with having to hand back the franchises at some point in the future.


The Minister was pressed by Mike Amesbury MP – ‘as they’re working better than under the private sector, why not do the pragmatic thing that works best for passengers and leave them under public control, or create a publicly owned railway?


The Minister’s reply talked about the need for private sector investment, but as RMT showed recently, private sector investment in rail has been minuscule, dwarfed by the public sector since privatisation and largely outweighed by their extraction of dividends.  https://www.rmt.org.uk/news/publications/parasitic-bodies/parasitic-bodies-the-business-model-of-the-private-train-companies-who-are-wrecking-our-railways-0723.pdf


Between 2013 and 2022, the average Return on Capital Employed (ROCE) for the TOCs was 126%. These are not buccaneering venture capitalists, they are parasitic bodies making unjustified profits. 


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