Trouble ahead for operators

Christian Wolmar

The railways are going to be in the news this year. That’s not just because of their awful start of fares increases coinciding with a series of four unrelated overhead line failures on the West Coast Main Line but there are longer term issues at play which are going to figure on the political agenda.

 There has been a remarkable U-turn in rail policy which suggests that the civil servants concerned with railways in the Department of Transport do not have a long term understanding of the industry’s needs. When the 30 year strategy document was published in the summer of 2007, electrification and a high speed line were effectively ruled out. Yet now, just 18 months later, remarkably, both are very much back on the agenda not least because the new rail minister, Lord Adonis, is a long term fan of the railways and has rather more political clout than his predecessor, Tom Harris, having been a key adviser to Tony Blair.

 Adonis, too, is clear that the present structure of the railways is a mish mash resulting from a series of half baked reviews and responses to unforeseen events that nobody would ever have designed from scratch. As Terry Gourvish points out in his exhaustive and perspicacious new book, Britain’s Railways, 1997 – 2005, Labour’s Strategic Experiment (Oxford University Press) ‘pragmatism, rather than “blue skies” thinking’ drove the 2004 review process which resulted in the abolition of the Strategic Rail Authority and the transfer of its strategic functions to civil servants in the Department for Transport.

 Recent events, however, have led to questions about this structure. With the privatised railway facing, for the first time, a period of no growth, the usual mantra from the Department of ‘better the devil we know because further upheavals would be too damaging’, may no longer prevail.

 First, there has been the review of the rolling stock industry by the Competition Commission. Even though this was launched at the instigation of the Department for Transport, the Commission’s preliminary findings have rebounded on the Department with the suggestion that it is the franchise structure, rather than the rolling stock companies, which is at fault for the absence of a proper market.

 Then there has been the pre-emptive whingeing by the train operating companies about the effects of the expected downturn in passenger numbers. Keith Ludeman, the chief executive of Go-Ahead, has already made clear, in an interview with the Guardian in December, that he expects to go cup in hand to the Department to renegotiate his franchises should passenger growth dip considerably. The Department has always stressed that franchises are not renegotiable, so sparks could fly if the downturn is severe.

 And thirdly there the position of the infrastructure monopoly, Network Rail, which the new ministerial team have already realised is an uncontrollable monster whose costs appear out of control and whose present debt of £20bn will grow to £30bn by 2014. The company’s travails during the first week of the year when Virgin’s prestigious new Very High Frequency service between London and Birmingham, Manchester, Liverpool and Glasgow was completely wrecked because of infrastructure failings will not have gone unnoticed in Marsham Street.

 Indeed, interestingly, Adonis issued a press release encouraging people affected by the delays or cancellations to claim the compensation to which they are entitled. He may well have noticed how the train companies are very reluctant to make announcements about people’s entitlement to compensation, let along hand out compensation forms and yet are ready to claim money from Network Rail whenever its failings result in delays for their trains.

 On a recent trip to Japan Adonis observed not only the fantastic success of the Shinkansen high speed services, but also the remarkable Tokyo metro and suburban railway system which copes efficiently with far greater numbers than its equivalent in London.  Although the Japanese railway system is largely privatised, crucially it is vertically integrated, something which the Japanese are adamant is essential to encourage continued investment in the industry. There is none of the nonsense that occurred with the West Coast Main Line costing Network Rail – and therefore taxpayers – some £700m of the total £9bn in payments to the train operators who, of course, are the beneficiaries of the improvements on the line.

 While reintegrating the industry is still considered as far too radical by both ministers and civil servants in Marsham Street, the combination of the effects of the credit crunch and the failings of the industry have not gone unnoticed. If there are to be major enhancement schemes, such as electrification, or even a high speed line, watch out for new ways of implementing projects. There could even be a revival of the old Special Purpose Vehicles beloved of the late Sir Alistair Morton when he was head of the SRA. What is certain is that rail industry managers will have to be prepared to be fleet of foot in responding to a minister ready to make decisions and challenge vested interests.

 

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