Rail 432: It’s time railway bosses supported Stephen Byers

Operation, maintenance and renewal of the infrastructure have effectively been renationalised with the promise of long-term Government support by the creation of Network Rail. But, asks CHRISTIAN WOLMAR, why can’t ministers stop playing games and just admit it?

The headlines were predictable. ‘U-turn by Byers over Railtrack bail-out’ and so forth. On the face of it, that is correct. Mr Byers made some silly statements, playing to the Labour backbench gallery, about not giving any money to the shareholders. But the real story is much more interesting and shows Mr Byers in a much better light.

As usual, however, he has let his mouth get in the way of a good news story. And this, mark you, is a very good one. The important figure is not the £300m that the Government is throwing at the shareholders on the rather flimsy – though true – grounds that it will be cheaper than allowing Railtrack’s period in administration to run its course, but the £9,000m which the company limited by guarantee, now to be known as Network Rail, will raise as a three-year bridging loan to allow it to take over Railtrack.

At the hugely entertaining press conference held for the launch of Network Rail, there was a prolonged grilling of Network Rail’s Deputy Chairman, the patrician Adrian Montague, on the status of the £9bn. After all, at the moment, Network Rail is an unproven entity consisting of 50 people sitting in a spartan office opposite Warren Street Tube station in Tottenham Court Road which used to be occupied by Tussauds.

So why can it raise more money than, say, the notyet- created Wolmar-Harris Railway Company? Because, according to Mr Montague, it is ultimately backed by a “support package from the Strategic Rail Authority”. This, he stressed, is different from a guarantee from Government. He was unable to explain exactly how. And then someone from the Treasury I was talking to afterwards gave the game away: “The risk from the railways is back with the taxpayers.” That means the Government is standing behind the railways in an unprecedented way.

It gets better. Once properly established, Network Rail will raise more money, at a low rate, from the banks. It will be able to do so through a process known as ‘securitisation’ This means it will borrow on the basis that it knows it will be receiving an income stream from access charges over, say, a period of 20 years. Access charges are largely paid for by the taxpayer and therefore Network Rail will, effectively, be receiving a set amount of money, guaranteed by Government, over that period. It is railway Nirvana, the dream of generations of railway managers – a steady stream of income with which to refurbish the railways.

Now the reason ministers can’t just say that, and instead play silly games to try to ensure the borrowing is not on the Government’s balance sheet, is down to Gordon Brown’s lifelong affair with Prudence. Having direct Government funding would, too, be cheaper. But to put it bluntly, the railways – or at least that part concerned with operations, maintenance and renewal of the infrastructure – have been renationalised with the promise of lots of Government dosh for as long as most of us will be on this planet. Correct me if I am wrong, Gordon.

Whether it works out like that when we see the fine detail of the final deal is another matter. Nevertheless, far from being a shabby U-turn and a disaster for the railways, the creation of Network Rail is, in many ways, a triumph for Mr Byers. He might have got there by luck as much as good judgement and he made a lot of errors, but he certainly should earn the gratitude of the railway industry for having stepped in rather than leaving Railtrack to haemorrhage public money.

Yet one of the less astute columnists in a rival magazine has taken to using the word ‘bozo’ to describe the Secretary of State for Transport, a lazy habit he has caught from The Daily Telegraph and The Times who now routinely use that epithet even in news stories. I hold no brief for Mr Byers and certainly I am not about to defend his role in the ridiculous Moore/Sixsmith shambles. And, as I research the issue of the Public Private Partnership for the London Underground tube for my forthcoming book, I find it more and more incomprehensible as to why the minister should support it.

But at three recent private occasions involving senior railway executives I have heard nothing but praise for the beleaguered – another prefix which now seems inseparable from Byers – Transport Secretary. “He listens to us and tries to help,” said one. “He didn’t get involved in silly posturing over the industrial action,” said another. And – hold on to your hats – “He’s a class act,” said a third.

My advice to these industry executives is that they should stick their heads above the parapet if they want their man to stay in his job after the inevitable July reshuffle. He may well have told a few porkies over the Moore/Sixsmith business and he may have mishandled the initial taking over of Railtrack by failing to prepare sufficiently for the next stage. But essentially, unlike his blustering and rude predecessor, John Prescott, he has tackled the sore at the heart of the rail industry and begun the process of reconstruction. A Byers-Bowker-Armitt axis is a great improvement on Prescott-Morton-Marshall and the rail industry should try to ensure it does not lose its Transport Secretary and find he is replaced by someone with no idea or, even worse, lots of them. RAIL’s comment in issue 430 made a similar point.

So, you brave rail people out there, start a ‘save Byers campaign’ if that’s what you think the industry needs. The creation of Network Rail will, in any case, be a substantial legacy of the beleaguered one.

Targets – fantasy or reality?

The difficulties facing any Transport Secretary on the railways are highlighted by the thorough Rail Industry Monitor which has just been published*. It points out that despite the recent growth in rail patronage, the Government’s target of 50% (which may, in fact, be nearer 40%) further increase in the next decade may well be unachievable.

The analysis breaks down the recent growth between sectors and finds that the inter-city lines have been performing surprisingly poorly. Since 1986, which was a low point before the Lawson boom, the former Regional Railways, boosted by lots of investment from the Passenger Transport Executives, have shown a 50% growth, and patronage on London commuter services is over a third higher. Inter-city, however, has shown an increase of just 5% with patronage remaining well below the previous peak of 1988/89. That is an unexpected finding that is largely a result of competition from domestic airlines (which have seen passenger numbers double in that period) and the fact that real motoring costs have remained the same in that period while rail fares have risen by a third.

Usually this analysis is obscured by the overall figures, and the breakdown shows the uphill task faced by the industry in maintaining growth. The threat posed by the airlines was brought home to me when I bumped into a Government minister who – as people tend to when they meet me – told me of her recent bad experience on the railways: “I got on a train at Euston to go to Liverpool to give a speech and they said, ‘There’s going to be a two-hour delay because of problems with the overhead wiring at Watford’.” Since this meant she would not be able to give her planned speech until long after the function had finished, she got off: “Never again,” she said. “I’m going to stick to the planes.” Another lost customer and a rather influential one. I tried in vain to tell her that Virgin was due for a set of fantastic new trains and that the line was being upgraded.

However, a substantial growth rate is a key part of the strategic plan for the railways. Much of the hoped-for private investment is supposed to be, at least partly, financed by the growth in revenue for the train operators. However, the Monitor paints a pretty gloomy picture. No fewer than 11 of the franchises were operating at a loss (this does not, of course, take account of the recent deal involving Central and ScotRail) by the end of the 2001 financial year. This included all the former Regional Railways franchises except ScotRail but also two TOCs with some London commuter traffic, Anglia and West Anglia Great Northern.

The main reason for the poor figures was, of course, the reduction in franchise payments (which is not properly set out in the Monitor) of about £200m to £1.1bn with a similar drop happening this year. But there is another underlying cause which should be ringing alarm bells in the industry – labour costs have soared, with a 7.5% rise in the year to April 2001, which includes a 2.3% increase in the numbers employed by train operators to nearly 40,000. Let’s hope that most of these are drivers and staff dealing with the public rather than pen-pushers sorting out delay attribution. These statistics illustrate, yet again, just how wrong the franchise bidders got it when they thought they could reduce costs massively from BR levels.

If this parlous situation pertains after eight years of solid growth – Hatfield seems to have been just a blip – rail industry executives must be having sleepless nights over what will happen to the industry should there be a downturn in patronage, however small. It is evidence that any refranchising deals will require extra cash and will not be let on the basis of the expected levels of growth. With the Treasury already pumping massive amounts into Network Rail, Gordon is not going to be best pleased if the railways need more money just to keep running.

* Obtainable from TAS Publications and Events, Ross Holme, West End, Long Preston, Skipton, North Yorks BD23 4QL. Tel: 0870 900 1440.

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