There is no doubt that 2009 will be the most difficult year for the railways since privatisation. For the first time, we are likely to see passenger numbers stagnate or even drop. The new series of franchises negotiated on the premise of annual revenue increasing by double digit percentages ensure that any such slowdown will rapidly lead to a crisis. But what is far more interesting than the expected short term crisis is that we can expect a new politics of the railway for 2009 with a strong shift in direction by the government.
This has been made necessary by the remarkable events of 2008 which was a pretty momentous year, too, but, I predict, nothing like what the coming year will be. The year that has just ended would have been a turning point anyway because of the extraordinary economic events, but the fact that a new ministerial team, with a very influential junior minister, Lord Adonis, put in charge of the railways, ensures that there will be a root and branch appraisal of Department policy on rail.
Ruth Kelly had begun to understand that she was bounced into signing off a 30 year strategy that made no sense but she did not really have time or the will to consider the implications of what she had learnt. Lord Adonis, who has had a lifelong interest in railways and is a minister who is desperately keen to leave a legacy rather than merely shuffling papers through his office, is already working on a variety of detailed issues in an effort to try to steer policy in a new direction. For example, Adonis travelled to Japan in November to look not just at the high speed trains – shinkansen – but also at the intensively used Tokyo metro system and other rail investment projects. Then, on his return, he wrote in Prospect magazine: ‘Greater rail capacity, and reduced journey times on affordable trains, can do much to integrate Britain, helping to overcome the north-south divide and connecting up our regions.’ Now that is a rather different tone to Alistair Darling’s ‘too many trains are carrying around fresh air’ type of approach. The Japanese are very strong on integration, too, believing that vertical separation of a railway is madness, and that will not have escaped the attention of Adonis whose attention has been drawn to the fact that some £700m of the £9bn cost of West Coast Main Line refurbishment was down to compensation payments to Virgin and other operators.
A civil servant I know who worked with Adonis in the Department for Education (now called Department of Children, Schools and Families – perhaps the DfT will be renamed, Planes, Trains and Passengers!) told me that, having expected an aloof policy wonk who would not understand how government worked, in fact Adonis proved to be the most able minister that he had encountered and had got far more done because he knew how to get the best out of the system. Rarely of a minister, he is good at both detail and the big picture strategy. That was a pretty fulsome endorsement coming from a civil servant who was understandably sceptical about the ability of ministers to get things done.
Already, there are signs of change. Rather than, as in the 30 year strategy, electrification being considered a waste of money because we were going to get trains powered by hydrogen fuel cells, now we can expect a ministerial report in the next few weeks setting out a list of the best candidates for conversion. Then, later in the year we can expect an analysis of the potential of a north south high speed line. Now while I am a sceptic on the high speed line, what I would greatly welcome is a serious attempt to examine whether it is feasible and viable, and, in particular, what its carbon footprint would be.
Then we have the issue of how the Department is responding to the economic crisis. Already we are getting 200 extra carriages from Darling’s announcement that their procurement would be speeded up and my cynicism about the lack of detail on this announcement seems to have been misplaced. The procurement process for extra vehicles for Northern, Great Western and TransPennine was well under way by the end of December, with the intention that the order should be placed before the end of the financial year on March 31. Shows that they can work fast when they want to, but shame that the recession package has so little else on rail, something that Adonis will be keen to change.
All this activity is interesting because the ‘steady as she goes’ politics of the last couple of years with the Department for Transport merely sitting back and reaping the benefit from increased passenger numbers through the high franchise premium payments, has now gone. Instead we now have a situation in which both the Department and the operators are going to have to tread very carefully over the next few years. Already I feel that the operators have blown it by all imposing not only the 6 per cent rises they were allowed on regulated fares but also putting other fares up by even more. They may well find that these rises turn out to reduce revenue as people desperately try to find any alternative to the train especially as fuel prices are low and still falling. The operators are showing themselves to be narrow-minded short term profit maximisers but, frankly, that is understandable given the franchise structure under which they operate.
That is why the Competition Commission interim report produced just before Xmas is so interesting. This, remember, was initiated by ministers themselves because they felt that the rolling stock companies were pocketing super profits and that there was no proper market for rolling stock. The Commission has agreed about the lack of market but says it is down to the franchising system which needs reform through longer franchises. As I have written before, there are problems with whatever length of franchise is chosen – too short and there is no investment; too long and the government loses control – but now the ball is back firmly in the ministerial court, and a new franchising policy may well emerge.
On investment, too changes are afoot. The new ministerial team, I understand, was not taken by the logic of the Eddington enquiry into the future transport needs, published in 2007, which broadly suggested that Britain’s transport infrastructure was not too bad and did not need major improvements. The methodology has been questioned and the conclusions – which essentially was a do nothing approach – are thought to have been far too influenced by Treasury thinking. Eddington, too, coined the expression ‘modally agnostic’ and thankfully that has now been consigned to the Departmental dustbin after it briefly found favour with the civil servants. ( I first heard the expression spoken by a civil servant at a conference in February this year, and later, too, Tom Harris, the rail minister used it in an interview with me, but apparently there was great consternation within the Department once its use was publicised and now it is no longer considered to be policy.)
This opens up a huge vista of opportunity for the railways, despite the terrible times we are living through. Lord Adonis is already looking at the potential areas for electrification and is due to produce a report in the new few weeks which will consider what routes are most suitable. This, of course, puts the future of the Intercity Express Programme in doubt. That beastie, readers will recall, is supposed to be a replacement for the High Speed 125 trains, but because the Department was given free rein to draw up the scheme, it has become a terrifyingly expensive behemoth that the new ministerial team has been saddled with. In particular, the specification was for diesel as well as electric (and hybrid) trains but if there is to be widespread electrification, then the diesels will have no long term function.
Not surprisingly, the announcement of the IEP preferred bidder which had been slated for the week before Xmas, has now been postponed until February at the earliest but possibly even longer. So that is a big one to top the agenda for ministers this year but over the year we can expect a gradual reassessment and restatement of all aspects of rail policy. It will not be a revolution, but a rather rapid evolution. We live in interesting times.
Mystic Wolmar goes for broke
Mystic Wolmar therefore has a crystal ball that is fogged up with potential predictions. Like last year, Mystic is going to go for some tough ones, rather than sticking to the safe options, but obviously the first one has to be that:
1. At least one train operator will threaten that it will throw in the towel unless it is allowed to renegotiate the franchise
That, in fact, is almost a cheat since Keith Ludeman of Go Ahead, as quoted in this column in the last issue, has virtually announced this already but the message in Mystic’s crystal ball is so clear that he has to go with it. The second one is not directly to do with the rail industry, but will have an obvious impact on it:
2. Geoff Hoon will give the go-ahead for the third runway at Heathrow but the backlash will be so strong that any progress will be stalled by some type of review.
While on the subject of big schemes, here’s two where Mystic is sticking his neck out:
3. Boris Johnson is going to play hardball over Crossrail and the extra money needed for it, putting the scheme in jeopardy.
4. The Intercity Express Project will be ditched or completely amended because of changing policy over electrification, delaying it substantially
And finally the usual political one:
5. There will be no election in 2009 and no change in the Transport ministerial team (and, there will be a hung parliament when the election is finally held in March 2010).