Rail 483: Why Britain’s railway just isn’t worth £4bn a year

The amount of subsidy that taxpayers pump into the railway is shocking when compared with what they get out of it, concludes CHRISTIAN WOLMAR.

I never thought I would write these words, but the Treasury is right. In particular, its efforts in trying to regain control of the railway’s finances and subject them to the same discipline as other spending are right, and the industry should be supporting them. The situation by which the Regulator determines the amount of money the railway gets in subsidy is not only a constitutional anomaly, but a scandalous waste of money.

I am in rant mode this time, so I will go further. The railway should not be allowed to continue to absorb this level of taxpayers’ money, and the primary purpose of the review should be to put a stop to it as soon as possible. The railways are, simply, not worth £3.8bn per year. Or, put another way, if we are going to spend that amount of money, the state should expect, and get more. At present we spend lots of money for a railway that, broadly, is neither expanding nor improving apart from the odd tarted-up station and a new train or two.

Now these remarks will not make me popular. On the face of it, they suggest there should be massive cutbacks in the number of services and even lines. But bear with me.The more that one looks at the dysfunctional way in which the railway is being run, the more it is clear that most of the extra money now being spent compared with the levels under British Rail is simply being wasted. The conventional wisdom suggested by many in the industry, most of whom have a vested interest in keeping the status quo, is that BR underinvested and we are making up for that by spending nearly £4bn of taxpayers’ money, three times the amount BR ever received.

However, that proposition does not hold water. BR ran a tight ship because it had to. Responsibility for expenditure was ingrained on the heart of every manager within the organisation. Sure, this was not ideal.Neither was annuality, the fact that no one knew how much money was available from year to year as the Treasury was wont to change the figure randomly from year to year. And before I get any letters, I amnot advocating a return to BR. But the key point was that BR delivered the railway which the Treasury reckoned we could afford, while balancing a whole host of other needs. And rightly so. While, personally, I love the railways and see them as a vital part of our transport infrastructure, I feel unable to justify the fact that they are costing £4bn a year when my kids’ school does not have enough books and I have to wait two hours for treatment at my local Accident & Emergency department.

Indeed, this is a truly shocking figure for which all the senior managers reading this column should take some responsibility. But that is not their job – and that is the part of the problem. Their legal requirement is to maximise profits for shareholders – they have no responsibility for delivering a railway we can afford, which is why injunctions to reduce costs from ministers have fallen on deaf ears.

Network Rail is something of an exception because it is a not-for-profit company. But here the ethos – and in turn the responsibility – is wrong. The mission statement of the company is ‘Engineering Excellence for Britain’s Railways’. That is the wrong objective, a knee-jerk reaction to Hatfield and Railtrack’s demise. Like British Rail, it should be giving us the railway which the country can afford – and while we all would like excellence, an average standard would do fine.

And there is a need to take risks which under the present structure it cannot do. Ivor Warburton, who ranWest Coast up to privatisation, recently related a good story to me. One year, the capital budget had to be cut back. Warburton concluded that the replacement of a culvert, between Nuneaton and Rugby, had to be postponed.He asked the civil engineering director, Derek Smart, what chance there would be of a collapse during the year: “About 40%,” came the reply. Warburton said: “I will take the risk” and Smart went away muttering, unhappily. In the course of the year, the culvert collapsed but, as Warburton put it, “that is one example of how managers have tomake rational decisions with a risk attached.The decision was right, even if the result was inconvenient.” Now, of course, such a decision is split between several parties, with the threat of contractual liabilities – and bad PR as the various parties blame each other – and so no one would dare to take the risk.

Let’s examine a specific argument which NR uses to justify its ludicrous levels of spending on rail replacement. In its press release of March 31 last year, NR said that there was a backlog of 4,000 miles of rail replacement. The required rate, based on a 40-year rail life on 20,000 miles of track, is 500 miles a year. BR, it said, only did 300 miles a year in its final six years and Railtrack only 200, which meant there was a backlog of 4,000 miles. But actually, as reader Simon Gell pointed out, in simple arithmetical terms, that works out at only 3,000 and, moreover, according to figures provided by the RailRegulator in the NR annual statement, Railtrack renewed 450 miles annually. The backlog, therefore, seems to be nearer 2,000 than 4,000, further evidence engineering rather than regulated expenditure governs NR operations.

Cost has soared because no one owns the problem. Lots of people are responsible for bits of it but there is no organisation or company with overall responsibility in the way that there was under BR. It is, therefore, not the fact that BR underinvested which is the problem, but the fact that spending decisions are no longer made by people who are subject to Treasury discipline.

Here is another example of the way that a fragmented railway has led to increased costs. On March 3, the Strategic Rail Authority published its RouteUtilisation Strategy for the Midland Main Line. This 80-page document concludes, principally, that lengthening trains will deliver “40% more carriages across the morning peak hours.” Wow – longer trains means more seats. To be fair, it comes up with a few other suggestions, such as there will be “14% [not 13 or 15, please note] less delay by restructuring the timetable to a standard hour timetable for Thameslink and MidlandMainline.” Wow again – regular timetables reduces delays.The Swiss have known that for 30 years and, nearer home, clockface timetables were used by the Southern before the war.

I showed the document to another old BR sweat, one who had been a fervent supporter of privatisation but is now having rather severe doubts. “How did this work in your day?” I asked him. Essentially, there would be a meeting some 18 months before the implementation of the timetable which would set the broad parameters and this would be updated as the date of implementation approached. It would be an ongoing, constant process and there was far more flexibility in the system because decisions could be carried out by a small management team working together. He totally debunked the idea that BR was unresponsive to changes in demand.

Moreover, he added: “In my day this would have been sorted out by local management, at the sub-sector level, after consultation with the TUCC [now the Rail Passengers’ Council]. The idea that this would be announced by the equivalent of the chairman of the board at a national press conference is laughable and this sort of thing is one of the arguments against the current structure.”

And, indeed, explains why it costs somuch. At a modest estimate, the route utilisation strategy – the first in a series being produced by the SRA -must have cost £500,000 to produce inmanagement and consultant time. All to do what an integrated company would see as part of its day-to-day task.

Supporters of privatisation argue that escaping the Treasury yoke is the key benefit of what has happened on the railways in the past decade. Taxpayers are obliged to stump up for the bills of the private companies, and that ensures adequate funding is guaranteed. But, as one BR sweat put it to me, the Treasury may lose battles but it is never defeated in a war.

Make no mistake – the rail review is the mechanism the Treasury will be using to get its own back on the railways. Whether that is through scrapping the Crossrail project, a much greater level of integration through the amalgamation of various bodies and organisations, or reining back on the railways, is so far unclear, but for the Treasury, it seems, revenge is a dish that is best served cold.