Rail 479: ‘Two Brains’ and Howells unite on need for change

The Great Debate on the future structure of the railway is already taking place at the highest levels in Whitehall. Christian Wolmar who has long advocated such a debate hopes it will not be consigned to ministers’ too difficult’ tray.

This is getting scary. Mystic Wolmar’s prediction that there would be a debate over the structure of the railway this year has been fulfilled by January. At last, we are seeing the beginnings of the discussion about how to run the railways which this column – against strong opposition from certain quarters and vested interests within the industry – has long advocated. In fact, it was inevitable it would get on the government’s agenda once it was realised that the railways were costing nearly £4bn per year.

Oddly, the first public inkling that the structure of the railways was eliciting interest came from the opposition in the form of David Willetts, always known as ‘two brains’ (slightly unfairly, as some of his fellow Tory MPs reckon he deserves to be known as ‘three brains’). Willetts, in an interview in the Daily Telegraph just before Christmas made the remarkable admission that rail privatisation had been a big mistake for which the Tories are sorry. (Well gee thanks, but let’s hear it a few more times before we give absolution.)

Willetts said that, in particular, the separation between the track and the operations was ‘ideologically driven and wrong’. Willetts confirmed that it was the Treasury who dunnit: ‘Rail privatisation was a classic example of taking a model that had worked for one industry and wrongly applying it to different circumstances. The Treasury applied that model to the railways and it was the wrong model.’

While the Tories have not worked out what to do, Willetts makes clear that he thinks the management of the track should be reintegrated with the running of the trains: ‘Historically, the way the railways had worked was by what the economists [euh, not just them guv] call vertical integration which, he argued, was the way to provide a good service.

Willetts rather spoilt all this common sense by saying that he would talk to David Hare, author of The Permanent Way, the play on rail privatisation currently a sell-out at the National. Now just perhaps it might be better to go talk to a few people who run the railways instead. Hare might have spent the past year talking to them, but he is a playwright, not a rail expert!

And now it appears that we have cross-party agreement on the need for vertical integration. Early in the New Year, Kim Howells, the junior transport ministers, concurred with Willetts. In an online interview, he said that he was ‘very much in favour of reintegrating the rail system – the relationship between the train operators and the tracks’. The railway was ‘organised in the most fragmented imaginable and the chains of command are very, very long. I’ve yet to see the logic of the decision.’

That last sentence is crucial. When I give talks on the subject of rail privatisation, the question often arises as to why we have the current structure. It is an unanswerable question since no one, even Richard Bowker, can possibly justify the complexity of the current system. The Tories’ initial model at least had some coherent strategy behind it, wrongheaded as they now admit, but following subsequent attempts to patch up the industry, today’s structure has no logic. And Howells, a free thinker, who has spent considerable amount of time touring round the industry, knows that.

OK, no one would chose to start here, but where do we go from here? Well for now the Government is happy to test the water. Howells is something of a loose cannon with a licence to float ideas which may then be discounted by his fellow ministers. Indeed, the Department for Transport was quick to distance itself from Howells’ comments, saying that he ‘was not indicating a covert policy to renationalise the railways or reintegrate the train operators and Network Rail into a single company’. Instead, the minister was ‘hinting at a plan to open integrated control centres across the network’.

That is just balderdash. We are all grown ups and Howells is an intelligent fellow who knows precisely what he was saying and it had nothing to do with ‘integrated control centres’ . The fact that Howells is still in post and will keep on giving us the benefit of his thoughts suggests that he ought to be taken seriously, even though the ideas are at a very early stage.

So if we are going to have a proper open-minded debate, let’s apply some logical thinking and ask the right questions. Here’s a few to get the ball rolling:

  • What are the strengths and weaknesses of the current structure?
  • What is the purpose of the current structure and its various elements such as the performance regime and franchising?
  • What are the priorities that should inform the rail industry of the future?
  • What are the factors that have led to the soaring rise in subsidy?
  • And can they be mitigated?
  • Do we now accept that the state will always need to subsidise the industry?
  • If so, what should the role of the private sector in the rail industry be?
  • Can we accept that private companies must make money if they are to be involved?
  • And if so, should their rate of profit be regulated?
  • Should private companies share the risk or should it rest entirely with the state?
  • Should we be concerned about the notion of recreating a British Rail type organisation?
  • Can the industry be vertically integrated despite EU rules?
  • What can we learn from railways in other countries?
  • What is the ideal structure for the industry?
  • And how can we work towards it, even if it is not achievable?
  • What regulation will be needed if there is a simpler structure?
  • How can safety be dealt with more rationally?
  • Will changing the structure save enough money and improve performance sufficiently to make it worth while?

‘Here we go again’, I hear parts of the industry moan, ‘just what we don’t need’. Indeed it is noticeable that even before the debate gets underway, tempers are already getting frayed in the industry. In The Independent on January 12, we had Chris Garnett of GNER slagging off Voyagers with a swift riposte from Richard Branson and Bowker joining in the fray; and meanwhile, in the FT, Bowker himself launched a fierce attack on ‘people who don’t want to change’, whoever they may be.

But frankly, whatever short term upheaval there will be, it is a small price to pay given the huge amounts of money that are being wasted in the current crazy set up. For years, everyone in the industry has been hoping that it will all just suddenly start working properly. It hasn’t, and as unwelcome as any upheaval is, perhaps we just need to have the discussion, make the decisions and then concentrate on what the focus of the industry should be – delivering the rail services passengers expect and deserve.

Moreover, as I have argued previously, the industry is evolving all the time anyway, which is unsettling to all those who work in it. Far better to work towards a coherent stable structure, rather than the constant tinkering at the edges that never quite delivers a proper shake up but creates a permanent state of uncertainty.

It may be, though, that ministers simply dump this in the too difficult basket and keep on, at least in the short term, coughing up the dough for the railways. While that may seem reassuring and the safest option, for the long term future of the industry it will be the most disastrous. Because sure as eggs, no government – especially a Tory one – will accept that the railways have to be in receipt for ever of three times the amount of money they used to get. So if rearranging the structure is ruled out as a way of reducing subsidy, cuts in services will be the only option.

My friends in Whitehall confirm that there is a debate taking place and various options are being looked up. Worryingly, the Treasury, which Willetts fingers for the initial cock-up, is playing a central role in these considerations. Though surely the mandarins will not make the same mistake of failing to ask people who work in the industry and know how to run trains about what they would do. Or will they? And one desperately hopes they will not ask David Hare.

Cuts in services: who decides?

At barely three days notice, South West Trains advised passengers that they would be suspending services between Guildford and Ashford, apart from a handful of peak hour trains for several months. This, apparently, is because there is a shortage of drivers as they need training for the Desiros and therefore it is to avoid short notice cancellations. Surprisingly, the SRA has sanctioned this without imposing any fines or penalties, at least for the first two weeks. Yet, SWT, which is highly profitable and next year will get a massive increase in franchise payments from £25m to £106m, will save money by not having to operate these services.

SWT argue that this is a lightly loaded service and few people will be affected. That is perhaps because the service is unreliable, but, in any case, providing the trains is a franchise obligation, that is nothing to do with SWT. If this is a sign of the way that the SRA is going to manage franchises in the future, then it augurs badly for passengers. Certainly, as ever, the SRA seems unable to justify either the first or last word in its name.

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