Rail 491: Rail the loser as bosses play ‘let’s pretend’ game

Privatised railway chiefs like to portray themselves as buccaneering capitalists in a risk-taking industry but the reality, as CHRISTIAN WOLMAR points out, is that the Government cannot allow it to fail.

The one certainty the Government gives us about the forthcoming review is that the railway shall not be renationalised. But ministers have not attempted to define where the limits of the private and public sectors should be and therefore are unable to tell us what defines ‘private’ or ‘public’ or, indeed, why the line should be drawn in a particular place.

Richard Bowker, in reflective mood – presumably because he expects to be jobhunting soon – admitted in a speech to the Railway Forum on June 29 that “from a definitely patchy start in the private sector, a great deal has been turned round. But we’re only really beginning to understand what is actually required and putting it in place.”

In other words, ten years after the start of the privatisation process, the railway is still floundering in its new privatised world and has only just begun to get things together.That’s a pretty amazing admission fromaman who has been proselytising about the benefits of this wonderful new world since he took on the job at the SRA in October 2001.

Bowker does seem to have learnt much in his time at the SRA. Of the West Coast, he says: “The real lesson is never allow the private sector to self-manage when the public interest is so critically at stake.” I don’t think he would have said that when he was working for Virgin.

Bowker therefore highlights the lack of clarity about the respective roles of the private and public sectors.We got it wrong in the past, he is saying, but we know now what we want.

I wish I shared that optimism. There are many in this industry who play at capitalism, benefiting from the idea they are in a heavily risk-taking industry while actually reaping the rewards from the fact it is a state-subsidised enterprise which cannot be allowed to fail.

Take the TOCs. Senior people in the SRA are, privately, aghast at the chutzpah of the TOCs who come back and ask for more money whenever they get into trouble and yet have banked large profits when they got their bids right. Bowker, in the same speech, spoke of the “the tough competitive bidding process that creates the platformfor a value-for-money solution for taxpayers and meaningful delivery for passengers. That was not the model bequeathed to us by privatisation.” Bowker now says the SRA has got it right, but that is what Tom Winsor thought when his access charge review was published almost simultaneously with the Hatfield accident.

The performance regime is another example of where companies are playing at capitalism. Sure, there is money at stake, but whether it is Network Rail’s or the TOCs’, most of it is coming from the taxpayer. So huge delay-attribution games are played at vast cost, with taxpayers footing the bill either way – no wonder the draft of the Rail Review sent to me suggested abolition of the whole process, something which unfortunately I reckon ministers will not have the courage to do.

Then there is the matter of the bonuses for the Network Rail directors. The level of bonuses was based on three criteria – performance of the railway, financial efficiency and asset stewardship – and apparently they met the targets on the two latter measures. So John Armitt and Iain Coucher, the two top men, each received bonuses of around £100,000 to boost their £400,000-plus salaries.

But hold on a sec. Didn’t the company run up a littlematter of an operating loss of £758m last year? Does that count as financial efficiency? Apparently so, because it relates to the late payment of grants from the Exchequer. This just goes to show that the whole business is faux capitalism, a game played seemingly for the benefit of a few executives. OK, so the staff received £600 each but that did not stop them voting for a strike; halted by NR with last-minute concessions. Had it not been for the fat-cat bonuses which the executives paid themselves, would the staff have voted for a strike?

What did British Airways’ top executives do when, according to their remuneration packages, they were awarded six-figure bonuses when the company made £230m profit?. They said ‘thanks but no thanks’ because, like NR, the company is going to be seeking massive ‘efficiency savings’ over the next two years and, according to a spokesman, “the executive directors thought it inappropriate to take their bonuses.” In other words, they didn’t want to inflame staff whom they may have to lay off in the next two years.

What heroes Armitt and Co. would have been had they done the same thing. They would have been lauded and feted, and the press would have said how mature they were. Moreover, they would have been unsackable. Instead, they look mean-spirited and selfserving, and must be regarded as expendable.

The key point is NR provides a public service.There are countless executives in local government and the NHS who are doing superb jobs inmaking improvements without the need to be incentivised by huge bonuses.

This issue raises a wider concern about the governance of NR. To avoid it becoming a government-run company, the Treasury decided it should be a Company Limited by Guarantee, with no shareholders but a group ofmore than 120 ‘stakeholders’ who, as public members, are supposed to oversee the governance of the organisation. But does that provide a proper system of checks and balances on NR? While the remuneration package was put to the public members, a majority are from within the industry and are suppliers or customers ofNR who are unlikely to want to anger it. Moreover, NR actually appoints the public members, endorsing or rejecting the recommendations from an appointments committee.

Does this system really provide suitable oversight of a supposedly private company that is spending £6.7bn this year, two-thirds of which comes from our pockets?

Here is where the faux capitalism is so damaging as the railway industry seems to get the worst of both worlds. There is no doubt that, privately, ministers groaned at the newspaper headlines on NR’s bonus payments. But they were powerless to do anything about it because, supposedly,NRis a private company. If NR had been created as a public corporation, the old Morrissonian model that was so successful with, for example, London Transport – or even, though many might disagree, British Rail – then ministers would have been able to ensure that these ludicrous payments were not made.

I wish I could be confident that the review will sort out this private/public muddle. Unfortunately, it has become an ideological struggle between what Labour perceives as the old and the new, rather than a rational debate on where the line should be drawn.

‘Safety’makes rail less safe

‘Fred’, a manager of a station – somewhere in England, as I have to protect his identity – informs me of the sort of barriers which prevent him doing a better job. He says his company is quite pro-active with good staff and ideas but is stymied by the horrendously complicated bureaucracy of the railway. He is desperate to improve his station but “it is near-impossible to get basic things done like routine repairs, full station repaints and the removal of graffiti.”

He adds: “We can’t repair the leaking roof because no-one will go up there without a scaffold underneath (the costs of the scaffold exceed that of the work, so Network Rail refuses to do it).Meanwhile the water pours in, on to the slippery surface below, which is a major hazard and a danger to our passengers.” He would like himself or his staff to go on to the track to paint out graffiti but the problem is that the only perceived hazard by the safety bosses is “the minute risk that under possession or current isolation, I could be hit by a passing train.” Therefore the station looks more of a mess, distressing passengers and posing a security risk to them by creating the wrong sort of environment.

‘Fred’ concludes: “The point of all this is that the railway today has inconsistent and frankly bizarre priorities – on the one hand, safety rules over us in all that we do, but on the other, basic maintenance can’t get done because of these safety procedures.All the while the station asset is degraded and ultimately will put not just passengers’ safety and security at risk, but will also turn them away from travelling altogether.”

Now if someone in NR got to grips with those issues and sorted them out, I would be happy to see them get a bonus.

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