Rail 480: Vague, restricted review falls flat after big build-up

The Government’s latest rail review is Treasury-inspired, and vague in both scope and aims. CHRISTIAN WOLMAR gives the Transport Secretary two cheers for recognising there’s a problem, but wonders how such confusion can lead to a better railway.

Trying to read the runes of the statement by Transport Secretary Alistair Darling announcing a rail review would be easier if there were a coherent strategy and idea behind it. But dismiss that from your mind, dear reader, and instead reconcile yourself to the fact that this is more government on the hoof – a reaction to various calls of ‘something must be done’.

Hence, working out why the statement was so weak and timid after such a big-build up – and, more importantly, trying to ascertain the likely end-game – are both extremely difficult tasks. The first question is: why now? There is little doubt that the decision to have a review was not prompted by the continuing poor performance of the railway (which, at last, shows some signs of recovery according to the latest figures from Network Rail) or even the fact that it is costing nearly £4bn annually, three times more than British Rail. Rather, it was the announcement by Tom Winsor on the level of access charges for NR over the next five years that so enraged various parts of the Government that a review of the structure of the industry was felt necessary.

Considerable pressure had been put on Winsor by the Treasury not to breach its planned spending limits for the railways but the Regulator, for good or bad, is a primeval force of nature not subject to the power of influence, especially as he is heading off into the sunset on Independence Day (July 4). Indeed, if one were – God forbid – to slice up Winsor, one would undoubtedly discover the words ‘Independent Regulator’ imprinted throughout his body like those sticks of ghastly, gooey rock sold in seaside towns.

Therefore, when Winsor announced that the Government was going to be forced to spend a couple of billion more than planned on the railways and that there was nothing Gordon Brown could do about it, a review was inevitable. This has to be the logical explanation. The announcement of the review represents a massive U-turn that is otherwise inexplicable. I have lost count of the number of times Alistair Darling has publicly rejected suggestions that the structure of the rail industry should be changed. However much privatisation was botched, the industry did not need another upheaval, he always argued. Until you factor in a furious Treasury and the need a peace offering. And so we have a wide-ranging review of the structure which may result in major changes.

Or do we? Sure, Darling said “the way in which [the industry] was privatised has led to a fragmentation, excessive complication and dysfunctionality that have compounded the problems caused by decades of under-investment”. That is certainly a world first: the recognition by Darling that the structure is problematic, indeed, ‘dysfunctional’.

But then he seemed to rule out much of the scope of such a review. The rolling stock companies are clearly not on the agenda since Darling boasted about how the average age of stock was going down and how one-third of trains were being replaced. But then, more curiously, he said government would “build on the work of the SRA and Network Rail bringing maintenance in-house by streamlining the remaining structure of the railway”. This suggests that ministers feel that the SRA and NR are sorted out, but that other aspects of the structure, particularly the HSE and the Regulator, need looking at.

There are two problems here. First, few believe that NR is anything like the finished article. For example, David Begg, the chairman of the Commission for Integrated Transport, highlighted NR’s failings in a series of interviews around the time of the announcement of the rail review. Secondly, this shows that the Government does not realise that in the complex web of interrelationships within the industry, once you start tinkering about with bits of it the whole house of cards tends to fall down.

And here is another oddity about the review. Submissions are apparently supposed to be sent to Richard Bowker, the chairman of the SRA. This tends to suggest that the SRA generally and Bowker personally will escape largely unscathed. But the SRA is widely viewed both within Whitehall and the industry as being a large part of the problem. And Bowker, in whom so many hopes were vested when he was appointed, has managed to make rather a lot of enemies in his two years at the helm, not helped by his belligerent speeches, such as his recent attacks on those who oppose change, whoever they may be. (Talking of belligerence, this review process has certainly brought out the worst in all the players: here is Tom Winsor’s latest effort: “The Cassandras will parade their ignorance, their vendettas and their prejudices.” Ouch, Tom, we doomsayers have feelings too, you know.)

Then we learn, oddly, that proposals can also be sent to Mark Lambirth, director of railways at the Department for Transport. Even if the SRA were considered to be functioning properly – a big if – the question of what are franchises for remains unanswered. Now that they are effectively management contracts, they merely seem to add layers of bureaucracy on to the railway, with both ‘head office’ and local management levels. Moreover, the franchising bid process takes up an inordinate amount of management time, at a cost that would be better spent actually on rail services, and all that seems to have resulted is a franchising merry-go-round, the purpose of which remains unclear. Yet Darling repeated the mantra of how “in many cases train companies have provided some innovation that was conspicuously lacking in the past”. Oh, like what, Alistair? Better than the concept of InterCity, devised by a nationalised railway?

It is widely recognised that the only sensible solution is for the SRA to merge with NR, therefore linking state control with state funding. Yet it is the dogma of the Treasury, which does not want to see NR’s debts on its balance sheet, that prevents this obvious solution. But what if the consultation process for the review revealed that this was the obvious solution?

One explanation for the muddle is that there is no doubt the statement was watered down in the late stages by the civil servants terrified of actually having appeared to have made a decision. First, ministers had wanted to state that the Railways Inspectorate would, thankfully, be taken away from the fundamentalist safety mullahs of the Health & Safety Executive and either be given to the DfT or the Office of Rail Regulation. But somehow Bill Callaghan, the chairman of the HSE, was able to fend off, at least for the time being, this move.

Then we expected an announcement about the eight network tsars revealed in the Daily Mail the weekend before the statement. In fact, this is a policy that is already being carried out, though not quite in those terms. NR is setting up a series of eight network control offices where a NR manager is responsible for making operational decisions. This, in fact, is using parts of the original agreements under which Railtrack was established but, because of the lack of expertise in the organisation and its failure to take its responsibilities seriously, it has never been implemented.

So it is very strange that Darling did not choose to take advantage of the statement in order to emphasise something positive that was happening already. Which brings us to the thorny question of vertical integration. Darling sounded lukewarm on this, stressing the problems (lots of services run on the West Coast, which ignores the fact that this could be easily dealt with, provided there is a primary user and a regulator) while saying that integration may be a possibility on other lines. As the franchising programme is continuing without delay, however, surely integration has been all but ruled out. Not surprisingly, this confused message resulted in The Times and The Daily Telegraph reports contradicting each other completely over this issue.

Another conundrum is the question of the independence of the regulator. If the aim of the review is to stop Winsor’s successor – Chris Bolt – access to the treasury’s coffer, then how come the Government seems to have retreated on the issue almost instantly? Within hours of Darling’s statement, a bizarre clarification was sent out by the department, reaffirming the Government’s commitment to independent economic regulation. But it seems impossible to reconcile this statement with the Government’s obvious desire to stop the regulator having direct access to the Treasury’s wallet.

So, in sum, we have a statement about a review being carried out by persons unknown, whose scope is unclear and with few pointers to its aims apart from the fact that renationalisation, whatever that means, has been ruled out. Moreover, it has caused uncertainty among private sector investors and staff, and set a whole lot of hares running that are going to be difficult to catch.

While Darling deserves a couple of cheers for recognising there is a problem, it is difficult to see how an optimal structure will result from so much confusion. Perhaps the civil servants, and indeed the minister, could look at the questions raised in my last column – just as a starting point.