Railways face good and bad times

The plan to introduce a thousand extra carriages on the railway announced recently by Douglas Alexander, the transport secretary, highlights the major problem now facing the railway: trains are becoming too popular.

Until recently that had been reliability. The chaos caused by the aftermath of the Hatfield train crash in October 2000 lasted for several years, resulting in more than a doubling of delays on the network. Passengers became so frustrated they would take earlier trains to be sure of getting to their destination on time. Gradually, that situation has been brought under control, thanks to huge amounts of cash from taxpayers via Network Rail although there is some concern that over the past few months improvement has slowed to a standstill.

The Hatfield crash was also the third in a series of four crashes in five years, culminating in Potters Bar in May 2002, which raised concerns about the safety of the railway. Those fears have been assuaged, thanks to an improved safety record now that the effects of privatisation have bedded down. The recent crash involving a Pendolino train at Lambrigg in Cumbria was, rightly, perceived by the media as a blip and there was none of the media frenzy that accompanied previous accidents, though Network Rail faces some embarrassing questions on why it left the points in question in such a poor state of maintenance.

Therefore, with trains more reliable and safety no longer attracting public concern – which, in any case, was always misplaced since rail is far safer than any other form of transport – it is overcrowding that has come to the fore as the most immediate problem facing the industry. There has been a phenomenal growth in the past decade, with 40 per cent more passengers and recently the rate of increase has accelerated, with several companies experiencing double digit growth in the past year, as the deterrent effects of the July 2005 Tube bombings are being forgotten. Yet there has only been a 10 per cent increase in the number of services and a smaller net rise in the number of trains. No wonder trains are getting fuller.

The announcement of the extra carriages, however, highlights more than the government’s concern about the growing protests from passengers having to stand or, worse, travel in the toilets. It shows that in the strange world of the privatised railways, the state still has a controlling interest and pulls the strings.

The reason is simple: money. The cost of the new stock which incidentally represents only an increase of around 8 per cent on the existing level, will mostly come from the taxpayer because, despite the success of the railways and their privatisation, they cannot pay for investment such as that themselves. This highlights a paradox. Privatisation was supposed to bring down the cost of the railways to the taxpayer. Moreover, at times of economic prosperity, the subsidy to the railways historically has fallen. Yet, currently, in broad terms the total financial support for the railways is over £5bn, far more than British Rail ever got and, crucially, some five times more than BR would have received at the height of a long economic boom.

This means that far from freeing the railways from the shackles of the state, it is still very much the government that is making decisions about investment in the railways. The main difference, paradoxically, is that now the railways are costing far more than when they were state-owned.

Moreover, it is clear that this high cost railway will remain. Chris Bolt, the chairman of the Office of Rail Regulation, announced recently that Network Rail is likely to receive between £3.2bn and £3.8bn annually in the period 2009 – 2014 to operate the railway, less than the £4bn currently being paid but still at a very high level historically.

Moreover, the Department for Transport is squeezing train operators very hard in franchise negotiations. The new franchises are currently being let on very optimistic growth predictions and it is the savings from these that, according to Alexander, have allowed the extra carriages to be funded. Already one franchise, GNER, has collapsed and any downturn in the economy would reduce the scope for any further reductions.

Therefore, with the railways costing so much, big investments to provide extra capacity are not on the agenda. Crossrail in London may, conceivably get the go-ahead, with Gordon Brown eager to show something for his elevation, and the reconstruction of Birmingham New Street and the long-delayed Thameslink 2000 scheme may also get the green light.

But otherwise the High Level Output Specification and the 30 year rail strategy to be announced in July are unlikely to be packed with goodies. The cost of running the railways is the greatest barrier to their growth, not an outcome that those who privatised it would have imagined. They envisaged cutting back services and squeezing out subsidy in an industry that was declining. Instead, railways are booming and it is hardly surprising that the complex and expensive model imposed on them as a result of the Tories Railways Act 1993 and its Labour successor in 2004 is not fit for purpose.

Those acts have created a structure for the railways that is too complex and inflexible. Rather than having one organisation which responded to demand, there are now train operators, rolling stock companies and Network Rail which have to be involved in providing extra capacity. Determining precisely how much extra revenue will be generated by the new trains – and consequently how much of the cost should be borne by the operators – will be a matter of informed guesswork by the officials in the DfT’s Rail Group. Moreover, providing a few extra carriages is the cheapest way of expanding capacity but it is limited. Then more expensive investment will have to be made on lengthening platforms and providing extra tracks.

Interestingly the Tories – and in particular the shadow transport Secretary Chris Grayling – have realised that the structure is inflexible and are talking of integrating back services with the infrastructure in an announcement of an alternative strategy in the summer. The dilemma for Grayling, though, is a rather fascinating one: if he wants integration, should he privatise Network Rail which is effectively a government company or nationalise the train operators which are heavily regulated private companies? He promises that he can find a way through this conundrum which would suggest he has discovered a genuine third way. This summer with documents emerging from both sides of the political spectrum promises to be a fascinating time for the overburdened railways and will set the tone for their future for the next decade.

Shares