The Passenger Railway Services (Public Ownership) Act 2024 removes the legal basis for new or extended passenger rail franchises and requires passenger services to be provided by public sector companies under public service contracts. It does this by amending the Railways Act 1993 to prohibit entering into franchise agreements except in a narrow transitional situation and to require future services to be secured by direct award to companies wholly or jointly owned by UK ministers under the Public Service Obligations in Transport Regulations 2023.
The Act also creates a short transitional mechanism that permits the Secretary of State to extend or re-award an expiring franchise in narrowly defined circumstances, brings the newly operating public companies within the public sector equality duty, and grants the Secretary of State wide powers to make consequential regulations—with affirmative parliamentary scrutiny where those regulations amend other Acts. The practical effect is to remove the primary route for private train operating companies to win franchises and to place operational and procurement responsibilities with government-owned entities and the Department for Transport (and its statutory frameworks).
At a Glance
What It Does
The Act amends the Railways Act 1993 to bar new franchise agreements and extensions except under a temporary continuation power. It requires the relevant franchising authority to secure passenger services by direct awards of public service contracts to 'public sector companies' under regulation 17 of the Public Service Obligations in Transport Regulations 2023, and excludes the normal pre-award publication requirement for those awards.
Who It Affects
Private train operating companies (TOCs) lose the franchise route to operate passenger services; the Department for Transport and devolved ministers must manage direct-award contracting and publicly owned operators. Procurement teams, legal advisers, unions, and supply-chain firms that service TOCs will face changed commercial relationships.
Why It Matters
This is a structural shift away from franchising toward public-sector operation of rail passenger services, altering procurement practice (direct awards/emergency measures), governance of operators (ownership definitions), and regulatory responsibilities including equality duties and statutory oversight of consequential regulations.
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What This Bill Actually Does
The Act rewrites key parts of the Railways Act 1993 so that passenger services are no longer placed with private franchisees as the default model. It achieves this by prohibiting the Secretary of State and the devolved administrations from entering into franchise agreements except under a narrow temporary continuation regime.
That prohibition is immediate: the Act treats existing designations and orders as if made under the new statutory language, and it comes into force on the day it is passed.
For future service provision, the bill replaces the former franchising duty’s competitive procurement model with a requirement that a franchising authority secure services only by making a direct award of a public service contract to a ‘public sector company’. The Act ties that obligation to the Public Service Obligations in Transport Regulations 2023, explicitly referencing regulation 17 (general direct award) and making clear that the usual pre-award publication requirement in regulation 22 does not apply to those awards.Recognising that some contracts might expire before new structures can be put in place, the Act provides a temporary continuation mechanism (section 30A) that allows the Secretary of State, in limited circumstances, to either extend an existing franchise term or enter a new agreement that must start immediately after the old one ends and must be awarded to the same franchisee.
The Act supplements that with an emergency-measures provision (section 30B) that authorises use of regulation 16 and treats the Secretary of State as if entitled to take those emergency steps even when the formal tests in regulation 16(1) are not met.The legislation also inserts public sector companies operating under these contracts into the Equality Act 2010’s list of bodies subject to the public sector equality duty. Finally, the Act grants the Secretary of State broad regulation-making powers to tidy up consequential provisions—authorising amendments to earlier or later Acts by statutory instrument—and sets out a two-tier parliamentary scrutiny regime for those instruments depending on whether they amend primary legislation.
The Five Things You Need to Know
The Act forbids the Welsh Ministers and the Scottish Ministers from entering into franchise agreements and restricts the Secretary of State from doing so except under the temporary continuation power in section 30A.
It requires relevant franchising authorities to secure passenger services only by direct award to a 'public sector company' in line with regulation 17 of the Public Service Obligations in Transport Regulations 2023, and it disapplies regulation 22 (pre-award publication) for those awards.
Section 30A permits temporary continuation only where the Secretary of State considers it not reasonably practicable to secure services otherwise, and any new agreement must start immediately after the old one and be awarded to the same franchisee.
Section 30B authorises entering into or extending agreements by using regulation 16 (emergency measures) and treats the Secretary of State as entitled to take those emergency measures even if regulation 16(1)’s normal conditions are not met.
The Act adds public sector companies operating under these public service contracts to the public sector equality duty in the Equality Act 2010 and defines 'public sector company' as a company wholly or jointly owned by the Secretary of State and/or the Welsh or Scottish Ministers.
Section-by-Section Breakdown
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Prohibition on new franchises and extensions
This section replaces the existing franchise-related provisions in the 1993 Act to ban franchise extensions and new franchise agreements except where the temporary continuation mechanism (section 30A) applies. Practically, that removes the default legal route for creating new private-franchise arrangements and re-labels Part 1’s statutory architecture from 'Franchising' to 'Provision', signalling the shift in legal approach and creating immediate legal effect for prior designations.
Public sector provision and procurement route
The Act amends section 30 to require that, in the absence of a franchise, services be provided only through a direct award of a public service contract to a public sector company as defined and regulated by the 2023 Regulations. It removes the previous fallback texts and expressly disapplies the pre-award publication obligation for these direct awards, concentrating procurement pathway authority in the direct-award mechanisms of regulations 16 and 17.
Temporary continuation and emergency measures
Section 30A creates a tightly circumscribed transitional power: the Secretary of State may extend an existing franchise or enter a new franchise agreement only where it would be impracticable to secure services under the new public-sector route, and any new agreement must continue with the same franchisee and begin immediately. Section 30B cross-references regulation 16 (emergency measures) and treats the Secretary of State as entitled to rely on those emergency powers regardless of whether the regulation’s usual entry conditions are satisfied—effectively allowing emergency direct-awards and contract extensions during the transition.
Definitions and ownership test
Section 30C supplies key definitions: it imports terms from the 2023 Regulations and defines 'public sector company' as a company wholly owned by the Secretary of State, jointly owned by the Secretary of State and the Welsh Ministers, or jointly owned by the Secretary of State and the Scottish Ministers. It also adopts the statutory meaning of 'wholly owned' and 'jointly owned' from section 58 of the Railways Act 2005, which will govern corporate ownership and governance issues.
Public sector equality duty applied to operators
This addition to Schedule 19 of the Equality Act 2010 brings companies providing passenger rail services under public service contracts within the public sector equality duty. That subjects those companies to obligations to have due regard to equality impacts when making policy decisions and delivering services, aligning public-operator duties with other public bodies.
Consequential amendments and regulation-making powers
The Schedule implements technical amendments to the 1993 Act to excise 'franchise' language and adapt registers and definitions. Section 4 grants the Secretary of State broad powers to make consequential, transitional or saving regulations by statutory instrument, with affirmative resolution required for instruments that amend or repeal Acts and negative procedure for most others—creating a structured but flexible route to tidy up subordinate law and operationalise the Act.
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Explore Transportation in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Passengers and service users — the legal framework prioritises continuity of service and gives government direct control over operation, which can reduce disruption risks during transitions between operators.
- Department for Transport and public authorities — the Act centralises operational choice and procurement authority, simplifying the process of placing services under government control and reducing reliance on competitive franchise timetables.
- Trade unions and rail staff — bringing services under publicly owned operators can preserve existing employment arrangements during the transition, and the added public sector equality duty creates a statutory lever for workforce and equality considerations.
Who Bears the Cost
- Private train operating companies and bidders — the Act removes the franchise route as a business opportunity, cutting off a primary source of revenue and expected contract pipelines for established TOCs.
- Supply-chain businesses and contractors — firms that supplied or invested alongside TOCs may see reduced opportunities and altered contract terms as services move to public-sector contracts.
- Devolved administrations and joint owners — Welsh and Scottish Ministers may lose autonomous franchising powers while having a potential joint-ownership role that creates complex governance and accountability questions, plus possible contingent liabilities.
- HM Treasury and taxpayers — running services through public sector companies shifts financial risk and subsidy responsibility onto government accounts and may require capital or revenue support to operate formerly commercial services.
Key Issues
The Core Tension
The central dilemma is between preserving rapid, government-controlled continuity of passenger services through direct awards and emergency measures, and preserving competitive procurement, transparency and devolved autonomy; the Act privileges the former, but that choice raises legal, financial and political trade-offs that the secondary legislation and practical implementation must resolve.
The Act creates a practical but legally blunt instrument: it achieves an immediate policy shift by substituting public-sector contracting for franchising, but it leaves a number of operational and legal choices unresolved. It ties the new approach to the 2023 Regulations, which means much depends on how those regulations are interpreted and applied—especially the use of regulation 16 (emergency measures) and regulation 17 (direct award).
Treating the Secretary of State as 'entitled' to emergency measures regardless of the usual thresholds lowers procedural barriers but increases exposure to legal challenge on grounds of improper use of procurement exceptions or failure to observe transparency principles.
The definition of 'public sector company' as wholly or jointly owned by central and devolved ministers generates governance ambiguity. Joint ownership by the Secretary of State with Welsh or Scottish Ministers is permitted, while those devolved Ministers are simultaneously barred from entering franchise agreements—an awkward combination that leaves unresolved who carries financial liabilities, how board-level accountability will operate, and how conflicts between central direction and devolved priorities will be managed.
The Act also creates a tension between speed (direct awards, no pre-award publication) and accountability (public spending, equality duties and parliamentary oversight of consequential instruments). Implementation will require detailed statutory instruments and commercial transition plans covering pensions, rolling stock leases, subsidy arrangements and contract novations—each a potential flashpoint for litigation and cost escalation.
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