Rail 602: Kelly’s tenure leaves little trace

Transport secretaries are like shooting stars, flaring briefly in the sky and disappearing forever. Occasionally they leave behind a legacy, but more often their tenure is so brief that their impact is soon forgotten.

It would be simplistic and dishonest to suggest that Ruth Kelly made no difference in her brief tenure because there are a couple of matters for which we ought to be grateful. She inherited a white paper which was written by the civil servants, headed by Mark Lambirth, then responsible for rail policy. While it contained a few, modest, goodies, its assessment of the future of electrification was not just flawed but plainly wrong.

The notion that it would be a waste of money to electrify lines because in a 15 years there would be trains powered by fuel cells and therefore there would not be enough time to pay back the investment was the kind of calculation that could only be made by a civil servant sitting in Whitehall. I suspect it was not a mistake but a deliberate piece of obfuscation to find a way not to invest in the railway.

Kelly, who worked limited hours because she wanted to get home to her children every night – a commendable desire but perhaps not one for an ambitious politician – was very slow to master her brief and certainly had no time to make significant amendments to the White Paper which was published a few weeks after her arrival. Her predecessor, Gordon Brown’s acolyte, Douglas Alexander, was too busy plotting the then-Chancellor’s smooth transfer to No 10 to pay much attention to detail and therefore this ridiculous policy slipped through.

Now, in Kelly’s farewell speech at conference, the tune has changed completely. She said: ‘Labour will develop options for a rolling programme of electrification of our railways – potentially the largest programme of electrification in our history.’ As U turns go, that one is skidding round 180 degrees on the M1! But one must retain a degree of scepticism, too, since this was the minister who told a Parliamentary committee that there was an unused rail route ready to be reopened running between London and Birmingham.

To embark on the ‘largest electrification programme’ in Britain, the government would have to outdo the efforts of Sir Herbert Walker’s Southern Railway between the wars. According to his biography (CF Klapper, Sir Herbert Walker’s Southern Railway, Ian Allan, 1973), that amounted to 1,400 miles which means that the programme would entail electrifying both the Midland Main Line and the Great Western, plus various other regional routes. Great stuff, but does anyone believe it?

We must, too, be thankful that she helped push through the Crossrail project, though there here precise role is unclear. As an economist, she would have taken a strictly orthodox view on the project and probably listened to the voices in the City urging the government to give the go-ahead, which Brown finally did last October as a pledge for the election that never was.

However, there are still distinct murmurings in both Westminster and the City that the scheme is not entirely safe from yet another postponement. Looking at the ‘heads of terms’ published in November which sets out the funding for the £15.7bn scheme, there are some optimistic assumptions on contributions from developers and the overall financing of the scheme from Transport for London which, given the credit crunch and the collapse of Metronet, will need re-examining. Yet, at the Labour Party conference, Kelly made a couple of passing references to Crossrail without any detail and Brown did not mention it at all – a strange omission given it is supposed to be Europe’s largest civil engineering project.

In the old world of Keynesian economics, Crossrail would be seen as a vital way of boosting employment in troubled times, but that sort of thinking, which incidentally helped seal the deal for the construction of the Victoria Line in the 1960s, appears to be a thing of the past and the project remains in doubt. Kelly was undoubtedly a supporter and her departure may lead to a rethink which, this time, would be disastrous as it would be impossible to safeguard the route for a second time.

In other areas of rail policy, Kelly mostly sat on her hands. She presided over the continued interference by central government into the running of the rail industry without ever suggesting that there should be a change of policy. She did not even consider changing the structure of the industry which would rid the industry of this paralysing micromanagement, and nor did she do anything about a high speed line – at least Alistair Darling used to mention it in his speeches occasionally in order to generate a bit of interest in his otherwise ultra-dull offerings.

In terms of wider transport policy, Kelly’s policies on road pricing and cycling were in marked contrast to that of her predecessors. She effectively killed off the idea of a national road pricing scheme by never mentioning it in public speeches and, in private, slowing down the pace of work on the scheme within the Department. A national road pricing is no longer ten years off, as it has been for the past ten years, but so far in the future that it is highly unlikely ever to be implemented. That is a great pity for the rail industry since an increase in the cost of road use would have sent millions of new customers onto the railways, as has been demonstrated by the recent hikes in petrol prices.

On cycling Kelly boosted annual funding from £10m to £60m to Cycling England (the cycling promotion organisation on whose board I sit), a recognition that cycling has a serious role to play in helping reduce congestion and improving the nation’s fitness.

Kelly’s legacy, therefore, is a mixed one though it is characterised largely by inaction. Her biggest failing, though, was over aviation policy. Her unequivocal support for a third runway at Heathrow, together with the notion that nothing should prevent the continued growth of flying rather belied her reputation as an economist. In her conference speech, she said: ‘I truly believe we must be brave in challenging those who would ration flying and make it once more the preserve of the rich’.

This is a truly bizarre statement from an economist. Is she saying that flying is a social service that must be subsidised, albeit indirectly through the absence of taxes on aviation fuel and a favourable planning policy? Yet, on the other hand, she has presided over a regime of franchise allocation which allows fares to rise in some cases at 3 per cent above the rate of inflation, pricing off people who might otherwise take the train.

New Labour ministers have always placed an emphasis on the value of the market in allocating resources. Yet, when it comes to transport, they refuse to follow the logic of their own arguments. They have allowed rail fares to go up faster than inflation while, until recently, allowing the cost of road transport to fall in real terms. And yet plane fares must not, if Ms Kelly is to be believed, rise in order to ensure that those stag parties in Estonia and those ridiculous Ryanair £1 flights (which in practice always cost more than that) can continue. Her successor hopefully will have a bit more understanding about transport economics and be prepared to reassess her policies.

Fares rip off attracts widespread comments

Since writing about the way that train operators refuse to take into account money already paid when people do not have the right ticket to travel, I have been inundated with similar stories. This issue has attracted more comments inbox than anything I have written about for years.

One of the responses, interestingly, was from a ticket inspector who said that many people do try it on ridiculously, by not listening to announcements and giving crazy excuses such as ‘I was ill yesterday’. He points out that tickets can be changed at the booking office for a £10 administration fee, but why not allow that on the train as well? Or, indeed, dispense with the £10 admin fee altogether in order to encourage people to come clean rather than trying their luck. Flexibility is the name of the game, and there is no reason to have these unnecessary rules.

I do, however, take his point that not all passengers are angels but nevertheless there is a fundamental injustice in that the train operators are not taking into account money they have already received.

I am sure there are some complex technical issues to be resolved, such as who gets the extra money and would the railways lose out. But this is an obvious area where the train operators could improve their image without costing much and offering a friendlier image in these stressful times.

At root, though, there is the wider point that the difference in price between advance fares, and even savers (or off peak as they are now called) and the normal peak walk on fare is far too great, sometimes a factor of six or seven. That is the root of the problem. In one of her more sensible moves, Ruth Kelly commissioned research into the fares issue. Let’s hope it comes out with a rationalisation of the situation. My instinct is that abolishing the very high peak fares on long distance travel would have very little overall impact on income, because the rail companies would be able to advertise standard fares that were reasonable and attractive.

  • Jack Rigg


    Re: ‘Fares rip off attracts widespread comments’

    I have just begun my studies for an MA in Transport Economics at a certain Northern University and am currently reading about the Principles of Transport Economics. As far as I understand, the way to maximise social welfare in the short run is to charge for transport services at marginal cost. When, in the morning peak, capacity is reached, it is socially optimal for the price to increase above the operating cost of providing the service. Whether this is equal to or twenty times the operating cost does not matter, welfare is maximised.
    It doesn’t end there though. In the long run, extra profits generated by such peak loads will trigger a train operator to invest in extra capacity such that price eventually equals long run marginal cost. Ie: peak and off-peak fares eventually become similar if not the same.
    Therefore, by calling for the artificial suppression of these high fares being charged are you not ignoring the signal for capacity investment along such routes? Shouldn’t your thrust be to ensure that these high revenue levels are reinvested in providing capacity (double decker trains + bridge heightening – now that would be an idea) rather than just to mute the inevitable consequence of high demand for train travel?

  • Kevin Steele

    Jack – the theory sounds fine, but is does the evidence we’ve seen not suggest that TOCs are simply profiting from the overcrowding and overpriced peak fares and either using them to pay the premium payments back to the government or simply pocket the money as profit. And they have no incentive to invest it because the short franchise lengths mean that they live with the threat of the plug being pulled the next time the franchise comes up for renewal.

    The thing about the current structure is that the “investment” in new rolling stock doesn’t come from the TOCs – it’s paid for by you and me like it always has been since BR days. The only difference is now that we now buy off the peg trains from Johnny Foreigner because BREL was privatised and ultimately fell into the hands of Bombardier, and a similar fate befell Metro-Cammell.

    Good case study here – I was on a Saturday service from Euston to Glasgow a couple of weeks ago and as usual the train was diverted via Birmingham and Manchester pushing the journey time up to over seven hours. Out of a nine-car Pendolino, four First Class carriages were carrying nothing but fresh air whilst the scenes in Standard Class resembled something you’d see in India with people camping out in the aisles and vestibules,meaning a trip to the buffet car and back took about 20 minutes by the time I’d climbed over everyone (and everything!).

    Those First Class coaches were put there in order to make money during the week where business travellers will pay the exorbitant £200+ walk-up single fares. They make even less sense at weekends when there is no meals or table service, so there is no incentive for anyone to pay them. In all fairness, you can upgrade for £15 at weekends but I was one of the few people with a Standard Class ticket who took the bribe – only to involve the nightmarish ordeal in the Standard coaches.

    But here’s the rub – the investment to sort problem this isn’t coming out of Virgin’s coffers – the deal to lengthen the Pendolinos is coming out of the taxpayer’s purse.

  • Garth Ponsonby

    During the summer months, Virgin declassified one of the first class carriages in Pendolinos, on the basis that first class demand at that period was less. it should be practicable to do the same at weekends, by means of (for example) paper stickers which are then removed late on Sunday night.

  • ‘TRAFFIC JAM: TEN YEARS OF SUSTAINABLE TRANSPORT IN THE UK’ this book was reveals many of the poor decisions that have been made from the failure to create integrated regional transport authorities with powers to award local franchise services to potential operators as is the case in London, by Whitehall throughout the land, to the strange resistance of some pro-car local highway authorities to actively facilitate public transport usage.
    Unfortunately, the new transport minister will find that this book has little that is politically and financially viable in terms of solutions that a future transport minister could implement