Victoria’s passenger and freight railways and tramways are to be progressively privatised over the next twelve months. The Minister for Transport, Mr. Robin Cooper, launched a major public information campaign on October 29, to explain the changes and their effect on passengers.

Rationale:

Since 1993, the Government has implemented far-reaching reforms to improve efficiency and service quality whilst reducing the burden placed on the state’s finances by the public transport system. In May 1998 the Auditor-General reported that these reforms had successfully improved service delivery and punctuality, increased patronage by around 10%, increased the number of train kilometres covered by 23% and produced ongoing operating savings of at least $245 million per year. Privatisation is th enext step in improving upon these gains.

Benefits:

Privatisation is anticipated to improve the system in the following ways:

• Incentives: the cost structures of private operators will better encourage increased patronage; given that they must provide a minimum number of services at a fixed cost, marginal returns from attracting extra passengers will be proportionately greater than at present.  The Government will also offer bonuses from operators who meet specified patronage increase targets.
• Innovation: a more competitive environment and the entry of other experienced transport operators into Victoria are likely to produce new improvements in service delivery and management.
• New investment: Government support for the public transport is almost $800 million per year. By reducing the proportion of this funding spent on subsidising passenger services, more funds will be available for capital upgrades of the system. The length of the franchise agreements will also mean that operators will have a tangible interest in the long-term maintenance of the system.
• Better value for money: Competitive tendering for franchises will improve efficiency, whilst increases in patronage will decrease the required level of Government subsidy. In the UK following privatisation in 1995, patronage has steadily increased by around 7% per year, whilst the total subsidy provided by Government is expected to have fallen by over 50% by 2002-03.

Structure of the industry:

The Government plans to tender the operation of the five separate passenger businesses: Bayside Trains, Hillside Trains, Swanston Trams, Yarra Trams and V/Line Passenger, which were disaggregated from the PTC last year. Prospective operators will effectively be tendering for the lowest subsidy from the Government to operate their system.

The private operators will effectively act as ‘franchisees’ of the Government. The franchises will last for a period of seven to fifteen years and be subject to strict operating conditions determined independently by the Government. The operators will purchase the rolling stock and fixed infrastructure for the term of the franchise (with corresponding responsibility for its maintenance), with the option of selling it back at the end of the period. The system will be regulator by a new Director of Public Transport, appointed by the Minister, who will independently oversee and enforce the franchise conditions.

The Government may also impose conditions on the expansion services as it deems appropriate. For example, the extension of the Mont Albert tram line to Box Hill by June 2002 will be a condition of the franchise for the successful tenderer for Yarra Trams.

Passengers Charter:

As a condition of their franchise, all operators must adhere to strictly-defined levels of service quality, to be enforced by financial penalties for non-compliance. The Passengers Charter sets out the main guarantees which the Government makes to customers as a condition of privatisation:

1. Services: the present network of train and tram routes throughout Victoria will remain in operation.
2. Timetables: will not be altered without the approval of the Director of Public Transport, in consultation with independent passenger representatives
3. Fares: will not increase above the rate of inflation. Existing concessions for pensioners, students and others will remain.
4. Metcard tickets: will retain their ‘intermodal’ nature, ie be valid on all trains, trams and buses
5. Timetable information: will be more readily available. A new Statewide timetable inquiry and bookings service, using a single local rate telephone number, is soon to be established.
6. Customer service: cleanliness, staff conduct, punctuality and reliability will be subject to new, stringent guidelines.
7. Safety: all stations will be properly lit and staffing levels maintained at premium stations.
8. Access: for people with special needs will be improved, in line with State and Commonwealth standards.
9. Heritage: the historic W Class trams will remain in service, with their traditional green and gold livery.