Want to radically reform Whitehall? - Franchise it out

by David Campbell Bannerman, Chairman of The Freedom Association, Conservative MEP 2009-19 and inventor of railway franchising


A few weeks ago, vaccine heroine Dame Kate Bingham criticised Whitehall for “groupthink” and a “devastating lack of skills and experience in science, industry and manufacturing”. The TaxPayers’ Alliance agreed, arguing in the Daily Mail that the civil service has become “self-interested, insular, snobbish and under-skilled.”


Clearly, the mechanism of government isn’t working. There is substantial waste, ineptitude and arrogance. So, how do we put it right? 


I believe there is a way, using a method already used successfully by governments of the past - it has been road-tested. I’m talking about franchising out services.


So, what is a franchise? It’s a licence agreement to deliver a given service, with common standards. But unlike ‘contracting out’, franchising is not just about managing things cheaper - it injects its own way of doing things. It offers culture change: new branding, experience, support networks, funders, and above all special ethos. This is what’s transformative.


Franchising is booming. Pre-covid, the UK franchise sector grew 15 per cent in 5 years – to £17 billion a year in 2020. Walk through any town and you see franchised enterprises: from large hotel chains (think Travelodge or Holiday Inn) to petrol stations, car dealerships, car rentals, estate agents, KFC, Costa Coffee, Starbucks, Subway, Pizza Hut, Clarks shoes, Toni & Guy hairdressers. The list goes on. But can such a model apply to government services? Yes. We have seen it with the railways. 


Railway franchises delivered: the pre-covid railways were carrying more passengers than British Rail ever carried, delivered a third more services, and billions more investment. Virgin doubled passengers between the north and London. Chiltern Railways transformed its services, expanding to Birmingham and reopening a line to Oxford. Brands like LNER, Great Western and Grand Central are performing like the railways of the past. My own franchise, Greater Anglia, replaced all of its 1,000 train coaches. Now open access operators are bringing new competition, such as low-cost London to Edinburgh trains. 


Of course, they’re not perfect, but investment makes rail better over time. And there is an ultimate big stick: if rail franchise companies don’t deliver, they are fired. Ask Northern Rail!


So how does franchising apply beyond the railways? Well, it has been used for schools and hospitals. Eton, Winchester, Wellington and Sherborne have franchised their special way of doing things to new overseas schools. The same is happening with British state schools. Multi academy trusts like ARK share their brand and expertise. Wellington College established Westminster Academy on the site of Castleton school. Successful state schools, such as Katherine Birbalsingh’s Michaela Community School, could also spread their successful methods around the country, driving out failed Marxist dogma along the way. A headteacher of a successful Liverpool private school told me the costs she incurred were the same as the (failing) local comprehensive’s spend per pupil. School ethos (such as a focus on cutting red tape for teachers) made all the difference. 


As for the NHS, I visited the only franchised hospital – the Hinchingbrooke Hospital, Huntingdon – run by Circle. It was hugely inspiring. Consultants wanted to work there, staff felt valued, and far more patients were attracted. The same can be said for franchised GP surgeries. Services can be franchised out locally, bringing new approaches, while retaining the reassuring NHS look, branding and ownership, with some UK-wide oversight.


This is exactly the kind of benefits franchising could bring. 


For Whitehall, it means the opportunity to review all government’s activities from top to bottom, to challenge what it does, and either consolidate or close down what’s not necessary. Governments should direct, but not manage. Direction means setting policy objectives through the democratic government framework, expressing these in franchise agreements, then using a high-quality franchisor to attract bidders, check compatibility and issue agreements. But the actual management should be done through franchised organisations.  


With this principle applied, the end of franchises would act like sunset clauses. Re-franchising would provide continual opportunities and drivers for change. That offers the ability to bring in fresh thinking - by introducing the best values, knowledge, good practice, technical expertise, training, central support, and cost efficiencies, in return for fees. 


I saw this first hand when Communications Director for the newly franchised railway industry in the late 1990s: it was a fruitful mix of cynical old British Rail, with strong operational knowledge, and fearless private sector, with energy and positivity - which fused into the best of both cultures and drove innovation.


That model delivered. Franchising is successful because it relies on a proven concept. Government franchises were proven for rail, despite poor Whitehall management such as the West Coast fiasco. Though covid has made longer franchise commitments difficult for the moment, we should be expanding franchising to Whitehall itself - not junking it. It could be applied to all government services, with the exception of functions requiring arm’s length independence – such as regulators or national security roles. 


So let’s franchise out everything from the DVLA, to the Forestry Commission, Student Loans Company, the Office for Budgetary Responsibility, Dartmoor National Park, British Film Institute, VisitBritain, to The Imperial War Museum and National Gallery. If we’re talking about bodies that could do with a franchising shake-up, how about the BBC? The Beeb’s Royal Charter could be a set of franchises, awarded by an independent body. BBC News might be franchised separately to BBC Drama, but retaining the BBC corporate look. After all, former local ITV franchises such as Thames TV and Granada TV worked well.


There aren’t just benefits for service delivery, but the taxpayer too. Consider what franchising can do for headcounts. On the railways, despite massive traffic increases, higher standards and better pay, core employees per mile of track was 7 before privatisation and 5 after. The railway system headcount went from around 150,000 in the late 1980s to around 100,000 after rail franchising. The savings for the taxpayer could be impressive. 


To conclude, franchising could bring a true revolution and fundamental reform of the management, innovation, standards and cost-effectiveness of government services. This is a reform with real bite.

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