The Department for Transport (DfT) has ended rail franchising after 24 years as it looks to deliver a “simpler, more effective model” to reform the UK’s railways.
From September 21, franchising is replaced with more demanding Emergency Recovery Measures Agreements (ERMAs).
The DfT said the announcement is the first step in “bringing Britain's fragmented rail network back together to a simpler, more effective structure that will take shape over the coming months”.
The DfT introduced emergency introduced emergency rail measures and suspended franchises for six months back at the start of the Covid-19 pandemic in March this year.
Grant Shapps, transport secretary, said: “The model of privatisation adopted 25 years ago has seen significant rises in passenger numbers, but this pandemic has proven that it is no longer working.
“Our new deal for rail demands more for passengers.
“It will simplify people’s journeys, ending the uncertainty and confusion about whether you are using the right ticket or the right train company.
“It will keep the best elements of the private sector, including competition and investment, that have helped to drive growth, but deliver strategic direction, leadership and accountability.
“Passengers will have reliable, safe services on a network totally built around them. It is time to get Britain back on track.”
The first stage is moving operators onto the ERMA transitional contracts to prepare the ground for the new railway.
These management agreements have tougher performance targets and lower management fees.
The new contracts allow the DfT to make an early start on key reforms, including requiring operators to co-ordinate better with each other and driving down the railways’ excessive capital costs.
Management fees will now be a maximum of 1.5% of the cost base of the franchise before the coronavirus pandemic began.
The ERMAs are a transitional stage to the new system, the biggest change to the railways in a quarter of a century.
Under current public health guidance, the intention is also for operators to run an almost full service to ensure there is space to help passengers travel safely.
ERMAs pave the way for wider rail industry reform that prioritises the passenger.
In 2018 Keith Williams, the chairman of Royal Mail, was asked to review the railways after a chaotic timetable change and the failure of some franchises.
The DfT acknowledged that until passenger numbers return due to Covid-19, "significant taxpayer support" will still be needed, including under the ERMA transitional contracts.
However, the reforms are expected to enable "substantial medium and longer-term savings" for taxpayers.
Keith Williams, chair of the Williams Review, said: "These new agreements represent the end of the complicated franchising system, demand more from the expertise and skills of the private sector, and ensure passengers return to a more punctual and co-ordinated railway.
"I am ensuring the recommendations I propose are fit for a post-COVID world, but these contracts kickstart a process of reform that will ensure our railways are entirely focused on the passenger, with a simpler, more effective system that works in their best interest."
The DfT is due to publish a new white paper in response to the Williams Review "when the course of the pandemic becomes clearer".
Paul Plummer, chief executive of the Rail Delivery Group, welcomed the end to the franchise system, which RDG has also been calling for.
Plummer said: "These transitional contracts should be a stepping-stone to a better railway.
"This needs to harness the experience, innovation and investment private sector operators bring, with local train companies taking the decisions that affect their passengers.
"It should be overseen by a new guiding mind for the whole industry and underpinned by a simpler to use fares system.
"A renewed and reinvigorated partnership between the public and private sectors will be the best way to improve services and help regrow the market for train travel which is good for economic recovery and the public finances. Combined with the measures the industry is taking to keep trains clean, this announcement means people can continue to travel with confidence."
Darren Shirley, chief executive of Campaign for Better Transport, also welcomed the decision to replace the franchising system.
He said: "The future of the railway now depends on the creation of a new system that is centred around passengers; delivers social, economic and environmental benefits; and gives more devolution to regional and local governments with competition in the right places.
"Delivering a reliable and affordable rail network that works for both commuters and leisure passengers is crucial to helping rebuild the economy and protecting the environment as part of a green transport-led recovery and today's announcement is a step in the right direction.”