One of the rail industry’s biggest moguls, Sir James Sherwood the head of Sea Containers, reckons he has found an easy solution to the problems on the railways. Chop out all the non-profitable lines and then the industry could be left to stand on its own feet, independent of government.
Superficially, there appears to be some logic to Sir James’s suggestion. Support for the railways cost taxpayers the staggering sum of £4bn last year, and that sum could reach over £5bn this year. And, indeed, there are lots of loss-making regional services. For example, every passenger on Scotrail’s services is subsidised to the tune of £4 while on Mr Sherwood’s GNER trains, passengers have to pay a premium to the government of £1 84 each.
This logic, therefore, would suggest another round of drastic cuts to the rail network. This, of course, happened in the 1960s and 1970s in the Beeching plan named after the then chairman of British Rail Richard Beeching. He closed thousands of miles of line and shut half the 5,000 stations.
While some of what Beeching did was sensible since people had deserted the railways for their newly-acquired cars and the network was almost as big as in Victorians times, he did not manage to make the railways profitable. And that’s a big flaw in the Sherwood argument. Railways around the world lose money but governments provide the support because they realise the wider benefits of a well-functioning network. Indeed, towns which lose their rail link suffer economically.
Moreover, Beeching went much too far, closing lines which provided vital connections or which were very useful as alternative routes when work had to be carried out on the main line. Over 300 stations have been reopened since the Beeching cuts, reconnecting many communities with the rail system.
The railway works as a network. Of course there is the odd branch line that could be cut without causing too many problems, although some local people would be badly affected. But any attempt to cut large chunks out of the network, as Beeching did, will begin to reduce the benefits of having a national network.
Take, for example, the Carlisle to Settle line. In the 1980s, that was the last major route which British Rail tried to cut. It argued that it was losing a lot of money and it was not worth maintaining, especially as the elegant Ribbleshead viaduct needed major structural work. Thanks to a vociferous campaign, the line was saved and is now a vital part of the network, carrying both large numbers of tourists who are vital to the local economy and freight.
Sherwood’s attempt to distinguish between lossmaking regional services and the rest of the network is artificial. While the East Coast main line on which he runs his trains is profitable, thanks to the fact it was renewed by British Rail in the early 1990s, the West Coast operated by Virgin loses money with each passenger receiving £11 59 in subsidy because it is currently being renovated at great expense. Is Sherwood seriously suggesting that the busiest line in the country linking London with Birmingham, Manchester and Liverpool should be closed?
The other problem with Sherwood’s solution is that he is trying to disguise the fact that he and his fellow industry leaders are part of the problem. In the old days of British Rail, there was one management united in a single objective, providing a railway at a price which the taxpayer could afford. That’s why the organisation managed to muddle with around £1bn per year in subsidy, and even less than that during times of economic boom when the railways were well used.
Now people like Sherwood are out to make as much profit as possible from the railways at the expense of passengers and other companies involved in the industry. Kim Howells, the transport minister highlighted this problem in the Financial Times yesterday. He said: ‘I think the whole structure at the moment needs changing. It’s a money-go-round and a bureaucracy which is crazy and we’ve got to get rid of all that.’ He hit out at how companies made profits in this ‘absurd system’, by saying that if the track owner Network Rail ‘fails to maintain its infrastructure properly and there is a signalling failure or a broken rail’, the train operator ‘whose trains can’t run on that line actually benefits from that failure’.
Quite rightly, the government intends to change the system, a move which puts the likes of Sherwood under threat. In January, Howells’ boss, the Transport Secretary Alistair Darling, announced a review of the structure of the industry. Belatedly, the government had woken up to the fact that the crazy privatised system created in the 1990s by the Tories is not working. And ministers have effectively admitted that the attempts by Labour during the past seven years to patch it up also failed. Howells made clear yesterday that there is going to be a radical overhaul with many fewer companies and organisations involved.
Fortunately, making extensive cuts in the way that Sherwood suggests is not, however, part of the agenda. No government would able to start cutting off major towns such as, say Burnley, Middlesbrough or Weymouth from the rail network which would be the only way of achieving the savings suggested by Sherwood. Politically it would be impractical, and economically it does not make sense. The money being wasted on the railways is a result of the crazy structure, not the fact that people in many smaller communities are getting the benefit of a rail service.