TRANSPORT secretary Grant Shapps has confirmed that traditional rail franchises based on a profit motive from collecting the ticket revenue, allied with a limited amount of commercial freedom, are about to come to an end.

He said the details will be outlined in Keith Williams’ Rail Review, which has been delayed but is expected soon.

Mr Shapps has outlined the concept of ‘passenger contracts’ with the private sector to operate National Rail, and quoted the Transport for London concession London Overground as an example.

Every visible detail of London Overground is specified by TfL, which decides on routes, fares, timetables, station management and the visual identity of the operator. The revenue also goes to TfL, which then pays Arriva to run the service, employ the staff and maintain the fleet. The same kind of contract exists on the Docklands Light Railway as well as on the capital’s trams and buses. Similar contracts are also used outside London, such as on Manchester Metrolink.

Speaking to John Pienaar on the BBC, Mr Shapps said: ‘Passenger contracts demand that they only get paid if they deliver the service. The problem we have with our franchises at the moment is that you can actually not run a service but still get paid for a quite a long time, until I eventually run out of patience and strip the franchise, like I’ve done with Northern, for example.

‘I'm a frustrated commuter and I think it’s unacceptable that we don’t have a reliable train service. In a sense the train network’s become a victim of its own success, because the more trains you run the harder it is to recover when a train breaks down, so there’s less recovery time.’

He went on to call for a railway where ‘everybody is pulling in the same direction’. He added: ‘Whoever you are, your objective should be to get the trains running on time. I don’t believe that is the central driving force of our railways at the moment.

‘If you asking me, are we just renationalising, the answer is no. There will still be private companies, there will still be contracts, But on a system which is this complex, you have to have co-ordination … there’s no other way to deliver a railway which runs on time.’

The Rail Delivery Group has doubts about the new policy.

The RDG’s director of public policy John Thomas said: ‘Rail companies want bold reform and we have proposed replacing the current franchising system with different types of contracts that better deliver for passengers, all overseen by an independent body and underpinned by a reformed fares system.

‘We don’t think today’s system should be ­replaced by a one-size-fits all approach. While tightly specified concession and management contracts can work well in, for example, commuter markets, we believe outcome-based contracts can be a better option on long-distance routes.

‘They give operators more flexibility to innovate and ­respond to passengers’ evolving expectations in markets where there is scope to encourage more to travel by train.’

Meanwhile the transport secretary is facing some urgent decisions, because both the Great Western Railway and Southeastern franchises are due to end on 1 April. Talks are underway with FirstGroup over the next stage for GWR and with Govia over the future of Southeastern.

Unless the first new passenger contracts can be agreed in the few weeks which are left, further Direct Awards appear to be the main option, because it would be far too late to run conventional franchising competitions and still meet the April deadline. The other alternative would be to transfer the franchises to the DfT’s Operator of Last Resort, but that solution is unlikely to find favour with ministers unless nothing else can be done.