Railways being restructured piecemeal

 

The Hatfield train crash, whose tenth anniversary is on October 17th, and its aftermath caused one of the biggest upheavals in the history of the rail industry. It wrecked the privatisation model created by the Tories a few years previously, led to the establishment of Network Rail out of the ashes of Railtrack, and resulted in the exponential increase in costs from which the industry is still suffering.  The performance of the operating companies, in terms of punctuality and reliability has taken most of the intervening period to recover and is only now reaching the levels expected by the paying public, brought up in an age of consumerism.

 The anniversary coincides with another period of upheaval and uncertainty that in many ways is yet another legacy of Hatfield. The failure of Network Rail and the regulator to tackle the ever rising costs, recognised by the Office of Rail Regulation to be 40 per cent above European levels, is set to result in the most fundamental changes to the industry since the demise of Railtrack.

 There is a series of separate but necessarily interrelated processes that will lead to what has been characterised by the government as evolution but is, in fact, a revolution. The most important – and worrying – of these is the McNulty review into the costs of the industry which has already published a scoping report and is now due to feed into the spending review process to be announced. Make no mistake – McNulty is going to publish a thorough analysis of the costs of the rail industry and his findings are likely to be radical and are likely to support the idea of more privatisation and competition.

 Then there is the franchise review process initiated by Theresa Villiers, the rail minister. She has found this to be harder than expected. In opposition, she had talked about longer term franchises and giving much more freedom to the train operators. However, clearly counselled to be cautious by her civil servants, her franchise review paper is a rather damp squib. The review suggests three reasons for reforming the franchise system – better quality services, value for money and the rather vague ‘creating the right conditions for a successful and sustainable rail industry’ – but she does not address the fundamental conundrum of franchising: if you let the operators have longer franchises, how do you then police them to ensure they deliver a good service. And if you give them too much freedom, such as over timetabling or catering, what happens if they start making deeply unpopular decisions. Ms Villiers accused Lord Adonis of micromanagement, but, as she seems to have realised, you can’t just allow operators total freedom – remember the threat by Richard Bowker, the then boss of National Express, to remove all catering from East Coast trains if Lord Adonis did not agree to renegotiate the franchise.

 Despite these difficult issues, the review process is bound to lead to changes. Already, the franchises coming up for renewal have been extended – presumably on terms generous to the operators since they have the Department over a barrel – while decisions are made over their structure and length.

 To add to this complex mix, there are major changes afoot with Network Rail which has committed a kind of collective suicide. Network Rail’s structure had attracted the attention of the Tories when they were in opposition as they spotted, quite rightly, that there was little or no accountability. However, given the difficulties of making radical changes, the organisation might have survived with a couple of minor adjustments – say a beefed up group of members – had its bosses not so antagonised ministers over the bonus issue that major changes are now inevitable.

 As soon as the coalition government came into being, ministers were expressing both privately and in public doubts about the generous bonus system for top managers at Network Rail and yet they took no heed. Lesson one of surviving the arrival of a new government is not to make enemies of ministers but that is precisely what happened.

 So now there is talk of breaking up Network Rail, perhaps with a regional structure based on cost centres, and perhaps a move towards vertical integration in some areas, an idea that had actually been shelved when Theresa Villiers took over from Chris Grayling as opposition transport. If, ultimately, the government decided not to break up Network Rail, other changes are bound to be made. Don’t be fooled by the idea that this is impossible because it is a Tory dominated government. In a speech to the Rail Freight Group in July Ms Villiers made clear that nationalisation was a possibility when, referring to the future of Network Rail, she said:’ We will not be driven by tortuous attempts to keep Network Rail off the nation’s balance sheet’.

 The rail industry is, therefore, in the midst of a revolution. If the result is the beginnings of vertical integration, a tighter control over costs and a better system of regulation, then that is fine. However, the risk is that the whole process is being driven by short term considerations about high costs, rather than the need to ensure a long term stable future for the industry. Moreover, the process of change is bitty and uncertain. Add in the Foster enquiry into the InterCity Express Programme, and of course the whole comprehensive spending review, and there are at least five separate strands to the changes taking place in the industry.

 This is crazy. A much more sensible idea would have been to initiate a proper inquiry into the funding and structure of the industry, carried out quickly and ensuring that the lessons of the past 15 years were properly assimilated. Instead, there is a real risk that what we are going to get out of this revolution will be worse than what we have now.

  • Greg Tingey

    ” …there are major changes afoot with Network Rail which has committed a kind of collective suicide.”
    Well, that’s a VERY diplomatic way of putting it.

    At risk of attracting legal sharks, should that have not read something like:
    ” Network Rail, now recovering from the departure of a harassing bully (no names, no pack-drill) may actually become a useful company, rather than a money-funnel for said departed megalomaniac, since the staff are no longer operating in an atmosphere of fear and suspicion, and may be able to do their jobs, rather than practiise sycophancy.”

  • RapidAssistant

    Before I go off on another one of my rants saying that even more good money is going to be thrown after bad trying to make a failed model work – let’s just home in on this obsession with competition……

    It has been flawed because there is NO workable way of allowing true competition on the railways. If I want to go from Perth to Glasgow I’ve got ScotRail and that’s it. If, for example you wanted to go from say – Carlisle to Newcastle you now only have Northern as ScotRail are dropping the through Newcastle to Stranraer service at the next timetable change.

    True – you can choose between the WCML and ECML to go between Scotland and London, but the long distance operators have turned ticket buying into a complete lottery where you may get a ridiculously low fare or get fleeced for over £100.

    How about a reasonable return fare that is available most of the time and is reasonably flexible (like an old British Rail Saver or SuperSaver). And if the argument against this is capacity – then make the bloody investment and provide it!!!!

  • Ian Raymond

    Well said Rapid. The railways need to take on the competition… but the ‘competition’ is the car and airlines, not other operators. Only thing is, if they are to do this seriously, they need to make a step change – in everything from pricing (as in your point!) to on-board comfort/facilities and information. The current immature farce where one operator distributes maps showing only their services has got to STOP. Now.

  • Peter

    McNulty can be as radical as he likes. The best thing would be vertical integration – and the sooner the better.

    The idea of one train operator competing with another is nonsense. It’s all very well for people to brag about Hull Trains or Grand Central, but the costs of the structure that makes these (sparse) services possible far exceeds the benefits.

    The current ‘privatised’ model is a total failure, in which all sorts of men in suits walk off with big money while the real railway stagnates.

  • Christian Wolmar

    Peter
    Read my latest Rail rant out this weekend which makes that point precisely. It will be on this site in a couple of weeks
    Christian

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