The takeover of Railtrack by Network Rail has rightly been welcomed across the industry, but the new organisation will never truly get a grip on spiralling costs until it brings maintenance and renewal back in-house, warns CHRISTIAN WOLMAR.
So farewell Ailtrack, as it was called in the last press release I received from the Black Tower, and hello Network Rail, aka Notwork Rail as the tabloids will dub it if things go wrong. The transfer, finalised in the first week of October, has been widely welcomed in the rail industry and rightly so.
The concept of a profit-maximising infrastructure company at the heart of the railway network was, as this column has argued many times before, completely daft. Inevitably, Railtrack was always torn between paying dividends to shareholders and spending money on improving the rail infrastructure. However, while the creation of Network Rail is undoubtedly good news, to suggest, as some politicians are, that the problems created by privatisation have been solved is equally daft.
I do not want to sound Cassandra-like but I suspect this will not be the last major organisational change which will be imposed on the railways during the ‘noughties’ and that the structure of the industry in, say, a decade’s time, will be quite different from today. The main problem, of course, is that ministers, and those in the industry who advise them, have not been courageous enough in tackling the fundamental flaws in the way the industry was structured at privatisation. At the time when Stephen Byers moved in on Railtrack a year ago, it seemed like a terribly brave thing to do. In hindsight, given the soaring bills of the West Coast Route Modernisation, the Railtrack ship was always going to sink. Indeed, it can be argued that had not Byers acted so precipitously, less taxpayers’ money would have had to be spent on acquiring the wretched company.
The two main problems which the emergence phoenix-like of Network Rail from Railtrack does nothing to address are the soaring costs in the industry and its fragmentation. In a speech to a Labour conference fringe meeting, John Armitt, the chief executive of Network Rail, managed to highlight both these problems in one anecdote when said that a part of WCRM which cost £50m in engineering work required the additional payment of £50m of compensation to train operators.
His suggestion that most of the money flows back to the SRA or to passengers puts an overoptimistic gloss on what is a crazy situation. Some of the money does remain with the operators who are being rewarded for having the opportunity to provide a better service. That is crazy economics brought about by a dysfunctional structure that remains largely unchanged by the creation of Network Rail.
Interestingly, when I mentioned the need for a more integrated railway, Armitt agreed and yet he has set his face against the most obvious initial move towards a more coherent structure, bringing in-house the maintenance and renewal of the network. This is despite the idea being given strong backing by many within the industry, including the Rail Passengers’ Council, whose National Director Anthony Smith stressed in his press statement on the day of Network Rail’s takeover of Railtrack that maintenance should be taken back in-house so that the new company knew what was happening on the railway.
Armitt’s principal reason for not wanting to bring back maintenance is that Network Rail does not have the capacity to do so. Indeed, taking on a whole new workforce of, say, 20,000 people from scratch would be a tough proposition. But what about doing it zone by zone? The problem, he says, is that once Network Rail started doing that, the private maintenance companies would know the game was up, pull out their good people so they did not get transferred to the new company, and would also make life difficult for Network Rail in countless other ways.
I accept that this sort of problem is tough but it is not insuperable. Remember when the railways were being privatised and having all manner of major changes foisted on them very quickly, everything happened more or less on time because there was such a strong – if misplaced – political drive behind making them. The railways need that sense of urgency and direction but it is sadly lacking.
This is mainly because New Labour is stuck in an ideological position that is increasingly untenable. Always informed by what they saw as the failure of the socialist model around the world, New Labour ministers have embraced a ‘private sector is best’ philosophy which makes its predecessors look like reluctant privatisers. Yet, as privatised entities fail and beg for more money almost daily – British Energy, National Air Traffic Services, Railtrack – the evidence that such an approach is, to say the least, flawed is overwhelming.
Bringing the maintenance in-house would be perceived as a nationalisation, a word that is banned from the New Labour dictionary, and I suspect that Armitt is under political direction not to attempt the move. There is, too, another reason for the reluctance of New Labour to sanction such a move. The maintenance contracts were originally outsourced because the Tories wanted to ensure that the unions’ power base in the rail industry was weakened. Recreating a huge direct labour force would, undoubtedly, give the unions a strong bargaining hand.
Nevertheless, the advantages greatly outweigh the disadvantages. The explosion in costs in the industry has a number of causes, not least the obsession with safety and the increase in traffic, ensuring that more work is done in the few early-morning hours when traffic is light or non-existent. But one obvious reason is that the small number of engineering companies knew that Railtrack was a soft touch and inflated their contract prices accordingly. Taking even part of the work back in-house would give Network Rail a benchmark against which costs could be measured. After all, in most industries where technology is being used increasingly, costs are falling not rising.
To some extent, Armitt has recognised this as he announced just before the takeover that Railtrack would take more responsibility for the management of the maintenance companies. In its press statement, Railtrack said it “will decide what should be done and when, with contractors responsible for the quality of the work.” Moreover, by December 2003, Armitt wants 85% of the track workforce to be direct employees of Railtrack’s maintenance contractors, in order to reduce the use of subcontractors, and Railtrack will take a much more active role in determining inspection processes.
It is, indeed, quite extraordinary that none of this was standard practice before but it still does not go far enough. Armitt argues that other industries such as aviation and oil function efficiently without such integration. But he knows that there are differences. It is conventional wisdom within the rail industry that the deterioration in performance on the railways since privatisation has been the result of the loss of the expertise held in countless railway workers’ heads. That knowledge of an ageing set of assets is not required in the other industries he mentioned.
Moreover, the main business of Railtrack (sorry, Network Rail, must get used to that) is the maintenance and renewal of the network. Contracting out its core function is a mistake. Ryanair, for example, contracts out virtually everything except actually flying and operating the planes. If Network Rail, like its predecessor, is to be just a bundle of contracts, then it is unlikely to be the right long-term solution for the railways.
It’s no wonder TOCs are going bust
The short item in this column about non-collection of fares (RAIL 445) obviously struck a chord with readers, given the number of responses.
One was even from a fellow transport correspondent who said that on the day of the first Tube strike, he took a train from South Acton to Brondesbury Park on the North London Line and found out-of-order signs at South Acton and the ticket office closed at both stations, so he had a free journey on Tube strike day.
He asks: “How many other strike-hit London Underground commuters enjoyed the unexpected benefit of ticketless rail travel? Is it any wonder that Silverlink’s parent company National Express has just reported an 80% fall in rail operating profits?”
Another reader, David Seligman, reports that one of the worst companies is Thames Trains which operates a number of pay train lines to destinations such as Marlow, Henley and Bedwyn: “On my last ten weekday early-evening trips from Bedwyn to Paddington, the trains have carried a conductor on only four occasions; on two of these trips they managed one leisurely fare-collecting trip through the train between Bedwyn and Reading; on the other two, one rode up front with the driver for the entire trip and the other was asleep in the rear driver’s compartment.”