Rail 411: Memo to new ministers: early action needed on the railway

It’s the day after the general election and an extract from a memo to incoming transport ministers sent by Sir Richard Mottram, Permanent Secretary at the Department of Environment, Transport and the Regions, has been ‘accidentally’ e-mailed to RAIL. CHRISTIAN WOLMAR shares with readers the exclusive insights which the memo provides into the minds of the ministry mandarins as they ponder the future of the industry under the new administration.

What has been referred to as the ‘rail crisis’ by your predecessors is probably the most immediate and pressing transport problem that requires ministerial direction.

To recap on recent events, the railways were privatised by the Conservative administration by breaking up British Rail into 100 different companies. The key elements were the flotation of Railtrack, the sale of the rolling stock companies and the franchising of the train operating companies.

In the immediate aftermath of this highly controversial privatisation, the railway performed relatively well and your predecessors, soon after the 1997 election, decided not to implement any radical changes to the structure of the railways. Instead, the Strategic Rail Authority was created to give direction to the industry and to take over the powers previously held by the Office of Passenger Rail Franchising.

However, a number of events have intervened which may mean that ministers will wish to reconsider this decision. First, there has been a series of very high-profile accidents on the railways which has pushed rail safety up the political agenda. Two of these disasters, Southall in September 1997 and Ladbroke Grove in October 1999, were caused by drivers going through red signals and this has raised public pressure to ensure that similar future accidents can no longer occur. The third, Hatfield in October 2000, was caused by a broken rail and has not only raised a series of issues about how the railway is maintained but also the speed restrictions imposed in its aftermath led to the rail crisis mentioned above.

Secondly, the performance of the railway had deteriorated markedly even before the Hatfield crash, raising questions about its ability to cope with the growth which your predecessors have envisaged for the network.

Thirdly, the SRA has run into a number of difficulties in its refranchising programme and some of these decisions will require ministerial action in the near future.

Finally, the targets in the Ten Year Plan, which envisaged more than £60bn of investment in the railways, over half from the private sector, are in danger of not being met because of the difficult climate for rail investment and the collapse of Railtrack’s share price following the Hatfield crash.

Taking the issue of rail safety first, ministers will be presented with the Cullen report into the Ladbroke Grove disaster within the next few weeks. This is likely to make a series of far-reaching recommendations about the management of safety on the railway. It will also put the blame for the accident on the train operating company concerned, Thames, which is owned by GoVia, and, to a lesser extent, on Railtrack. This may pose problems for ministers as GoVia has been awarded the SouthCentral franchise and Railtrack has received the support of your predecessors despite its recent problems.

There is another matter already on your desk. The joint inquiry by Professor Uff and Lord Cullen into the accidents at Southall and Ladbroke Grove has already reported and recommends that all 100mph lines should be fitted with the European Train Control System to prevent trains going through red lights by 2008. The trains should all have the equipment by 2010. The cost of this exercise is currently reckoned to be between £2bn and £3bn but ministers should be warned that such estimates tend to rise when the project leaves the drawing board. Moreover, there are doubts about the costeffectiveness of this expenditure, which will all have to be borne by the taxpayer, as, according to risk assessment calculations, ETCS will only save one or two lives per year.

While your predecessors expressed broad support for the Uff-Cullen recommendations, it is clear that the rail industry will be unable to deliver this improvement in the timescale envisaged and without the diversion of much-needed investment into this scheme of dubious merit. Ministers may well wish to draw up a form of words which conveys vague support for the ETCS concept but which does not commit them to this huge level of expenditure.

Secondly, the performance of the railway is now beginning to show improvement after the Hatfield débâcle thanks to the rail recovery plan in which your predecessors took an active part. While there is little that government can do to influence performance in the short term, it is an issue which has important ramifications in terms of public opinion. The number of complaints about rail travel has been running at a high level for several years and shows no sign of abating. Ministers may well wish to consider an action plan in this regard.

The performance of the SRA has not lived up to expectations. While your predecessors did not entirely manage to ascertain the reasons for this, indications are that there has been a reluctance on the part of the organisation to take decisions and to understand the needs of the private sector in order to lever in the maximum investment. Sir Alastair Morton’s term of office as Chairman ends early next year and it is expected that he will want to step down before then. Therefore, a list of potential suitable candidates is attached for early ministerial consideration.

A brief on the state of the refranchising process is also attached. As ministers will note, there has been little progress and as yet no deal has been signed. Ministers will wish to consider whether there are structural problems in terms of the approach of the SRA which are delaying progress, in particular whether 20-year franchises are the appropriate solution. The situation with the East Coast Main Line requires particularly urgent attention in view of the likelihood of the losing party seeking a judicial review.

Finally, the problems involving investment. The Ten Year Plan is the centrepiece of the Government’s strategy for the next Parliament but there are fears about its deliverability, particularly in relation to the railways. The Department is also very concerned at the increased demands from Railtrack for Government grant and the company’s simultaneous withdrawal from its long-term investment commitments. The cost of existing schemes such as the West Coast Main Line and Thameslink 2000 has escalated without proper explanation from the company. While the SRA has drawn up plans for investment in the railways to be delivered through Special Purpose Vehicles, these have so far proved difficult to construct and may add further complexity to the structure of the railways.

Advice

There are two clear options for progress on railways which require ministerial consideration: ‘do nothing’ or ‘structural review’.

The advantage of ‘do nothing’ is that events can be allowed to run their course without any further Government-instigated upheavals in the industry. The disadvantage is that public pressure has been increasing over the problems on the railways and these will be heightened should anything further go wrong, either a major accident or a series of closures/ delays as a result of the failings of the existing system. It is worth stressing that the experience of the past four years shows that the public expects the Government to be involved in the railways irrespective of the fact that they are now in private ownership.

The railway as currently structured appears unable to deliver the improvements which ministers are seeking and, moreover, the amount of subsidy is set to increase with little expectation that the money is being well spent. The Treasury has recently been taking a close interest in rail matters and may well try to recoup some of the allocation to rail unless it can be demonstrated that we can achieve value for money. While ‘do nothing’ may appear to be the lesser political risk, in practice this may not be the case.

The advantage of ‘structural review’ is precisely because the railways seem incapable of functioning efficiently with the current set-up. Ministers will be seen to be doing something to tackle an issue that has been perceived as a failure during your predecessors’ term of office. There are a number of schemes for possible restructuring of the railways which have been drawn up by advisers both within and outside the DETR. However, this strategy also poses risks. The railways have suffered from an unprecedented period of upheaval, first as a result of privatisation and more recently because of the Hatfield accident and its aftermath. There is also the possibility that a suitable structure cannot be found without renationalising part of the railways, a policy that was ruled out by your predecessors. However, as mentioned above, there are political risks associated with either option.

In summary, the railways pose one of the problems which need ministers’ most urgent attention. Early decisions are important because the rail industry’s capital-intensive nature means that the impact of any changes will take time to filter through sufficiently to affect public opinion. Your predecessors went against departmental advice in not taking action on the railways by introducing legislation earlier in the last Parliament. Ministers may well wish to consider an alternative approach during this term. Ministers will also wish to consider the problem posed by traffic congestion as this has also been an issue on which public pressure is mounting…(rest of document missing).

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