Railway growth unabated

The fascinating discussion at last night’s Institute of Railway Operators meeting focussed largely on the McNulty review and what is likely to come out of it. There is no doubt that the resulting changes in the rail industry will be radical, given that there is widespread anger within the government at the soaring costs.

It is also clear that there is a widespread feeling the HS2 is a given – ie that it will definitely go ahead. That’s because of the sharp and continuing increase of people travelling on the railway.  Richard Eccles, Network Rail’s planning director, went as far to say that the inflation plus 3 per cent will not have an impact on many routes as demand is pretty inelastic and people want to use the railway. The recent figures from the Office of Rail Regulation showing that there was a nine per cent rise in passenger numbers in the third quarter of the year compared with last year are truly remarkable. And as Eccles pointed out, of the six types of product sold by railways – long distance, commuter, etc – four continued growing throughout the recession: ‘what other industrycould say that?’ he asked rhetorically.

 Tim Shoveller, the boss of East Midlands, suggested to me that one reason for the growth is the continued rise in petrol prices, which is boosting demand for regional rather than long distance services. The constraint, ultimately, he  said, was simply the fact that there are no extra coaches available and that these trains were becoming overcrowded.   Indeed, Eccles pointed out that in previous recessions, coaches have been mothballed, while this has not been the case – though that is partly the result of the rigidity of the franchising system.

There was, too, much talk of vertical integration, though a sizeable number were in favour, overall a majority were against it. Everyone there realised, however, that these were fascinating times for the rail industry, with no one quite knowing what shape it will be taking in a couple of year’s time.

  • RapidAssistant

    Cutting through the bulls**t here, of course the operators are against vertical integration – it simply isn’t in their interests to either:

    A) become custodians of the infrastructure because they know little about how to run it. Are First, NX or Arriva obligated to maintain the roads that their buses run on – of course not! They pay road tax and fuel duty like everyone else so the state can do that for them.

    or

    B) return to a single integrated BR-type model as that would be the end of their businesses as they know it – a rail franchise is a licence to print money if you strike the right deal with the DfT after all – due to the absence of revenue risk as we’ve seen before.

    As I mentioned in another blog, when I quoted Tim O’Toole in the Glasgow Herald, who is now appears to be against vertical integration for the national railway (conveniently now that he’s the boss of a TOC) – yet he scorned the London Underground PPP. Odd.

    As for the argument about fuel prices – fair cop, but in the case of EMT does his trains not run on the same diesel fuel that fluctuates in price just the same which in turn has an impact on fares? After all, previous fare increases have been justified on the basis of rising oil and fuel costs.

  • Dan

    Thought provoking Rapid

    Is it the case that some in the industry are cautious about Vert Integ. simply because they can’t face yet more upheavel? ie a ‘conservative caution’ approach – and as you say they have learned how to make the current system work for them (which is not the same as working for the tax payer or passenger!)

    On fuel prices: I recall a Private Eye article a year or two ago pointing out that operators were on the one hand justifying fare increases based on fuel rises, as you say, but then Private Eye poiting out that in the very same operators parent group Shareholders Reports they pointed out that by striking long term deals with fuel suppliers (eg for bus diesel) they had insulated themselves from fuel price fluctuations. Not an option for the individual motorist of course.

  • RapidAssistant

    Well Dan there is upheaval and there is upheaval. Given that rail privatisation has given rise to two Railways Acts, the bankruptcy of the infrastructure operator, five major accidents, and a few franchise collapses thrown in for good measure you’d think they’d be used to it by now.

    Things happen in multiples of 25 years in British railway history, which means we probably have another 10 of trying to make the current system work before ministers eventually throw in the towel and admit they’ve been pursuing a red herring…….

  • Greg Tingey

    How long before petrolhead and friends, including McNulty NOTICE?
    We’ve got to have new rolling stock and soon.
    And re-openings, Scottish?Welsh style.
    I do note that some other interesting infrastructure projects are still going ahead.

    I suppose if our economy does go on picking up, then more money will be available ….

  • Chris Sharp

    It is often said that their are no coaches available. This doesn’t seem to stop the plans of Open Access Operators who seem to be able to expand their services when they want to. The problem is that it’s not economic to run extra coaches.
    A Harrogate Leeds train may be full to standing on departure from Horsforth, but the 50 to 100 people who have had to stand for the last 20 minutes of that service simply haven’t paid enough money (£1.65 Anytime single) to justify the cost of an extra coach or two.
    I was going to say that there is more money to be made on longer distance routes, but I’ve just checked Sheffield to Nottingham for this time tomorrow and I can buy a ticket for £4 single and a day return is £10.90. Hard to justify the cost of running a couple of extra coaches from Liverpool to Norwich to give seats to people who will be standing for 50 minutes of the 5 hour journey.

  • RapidAssistant

    Ultimately Chris, what you are saying is that under privatisation there has to be a “business case” underpinning every decision (in that dreadful management speak, again), which in turn is further complicated by operational constraints, and what you can and cannot do without violating the terms of a franchise and so on…..the eternal irony of privatisation is that it was supposed to allow private sector flair to bring innovation to the railways and be freed from these pesky shackles of inefficiency that were traits of being a state-controlled monopoly.

    Yet under BR, there weren’t half the number of stakeholders you had to keep sweet in order to make a decision…..

  • Matt

    Rapid : “Given that rail privatisation has given rise to two Railways Acts, the bankruptcy of the infrastructure operator, five major accidents, and a few franchise collapses thrown in for good measure you’d think they’d be used to it by now.”

    – What’s bad about Railways Acts?
    – “The bankruptcy of the infrastructure operator” was a politically motivated decision, abetted by Railtrack incompetence over regulatory reviews (according to Tom Winsor)
    – five major accidents – there were quite a few before privatisation as well (http://en.wikipedia.org/wiki/List_of_rail_accidents_in_the_United_Kingdom)
    – a few franchise collapses – businesses fail, get used to it

    “Cutting through the bulls**t here, of course the operators are against vertical integration – it simply isn’t in their interests to either:”

    Why did ATOC propose it then?

  • RapidAssistant

    My point Matt – first of all – was purely in response to Dan’s about the concept of “upheaval” – it was meant in jest more than anything else.

    Let me go through your points one by one:-

    The two recent Railways Acts have done plenty of damage. The 1993 one created this shambles in the first place, whilst the 2005 one was merely more rearranging of the deck chairs, one of the most heinous things in it – which has been quietly forgotten about – in my neck of the woods (Glasgow), took all rail powers from the PTE turning it into a toothless quango that spends millions on feasibility studies and building castles in the air but ultimately has neither the clout or the money to implement any of its grand schemes. Whilst its executives go off on jollies around the world in the name of “research”.

    The bankruptcy of Railtrack was inevitable and entirely of its own making. The company screwed up the WCML modernisation because it dispensed with its engineering knowledge base, then promised an unproven signalling technology which it knew nothing about onto an equally ignorant train operator and bunch of civil servants in Whitehall who knew nothing about railways. Secondly, after Hatfield it knew nothing about the condition of its assets (thank to the removal of its engineering capability) which in turn caused a cost explosion which was of its own making. Even GNER’s chief exec conceded that (in his own words) “Railtrack had to go”. The only thing that was wrong was that that Byres jumped the gun and should have let the company go to the wall on its own accord – which was surely going to happen anyway since it had already blown billions in the WCML debacle and the post-Hatfield shambles – its share price was heading for the earth’s crust. Then it decides to pay a divident to its shareholders – suicide. Irrespective of who put Railtrack out of its misery – its fate was sealed long before it got political.

    There is a strong case that Southall, Ladbroke Grove, Potters Bar, Grayrigg and more than any other – Hatfield – would NEVER have happened under British Rail. All had their roots in this rotten privatisation. Sure – I get your point that perhaps a differnet set of accidents MAY have occurred under BR – but that is just pure conjecture for which we will never know the answer.

    Franchise Collapses – these so called “businesses” (which they aren’t – they are protected by subsidies, and there are so many safety nets in place it is near impossible to make a loss or go bust in the usual sense), they don’t really take any real business risk – and as we’ve seen with GNER, NX and others if they start to struggle the Govt comes along and takes the franchise away and the TOC walks away relatively scot free – the nation cannot allow the trains to stop after all.

    The ATOC are very good spin doctors is all I will say. Perhaps by opening the floor on vertical integration they hope to air their’ members views on it in a hope of burying the subject once and for all. But it won’t go away. Interesting that Virgin were up for it – maybe because Richard Branson is now an infrastructure operator now himself anyway after the Virgin Mobile/NTL merger to create Virgin Media!

  • Dan

    Chris interesting post – raises useful operational point. My understanding – from EMT leaflets is that main congestion on Norwich – Liverpool is between manchester and Nottingham section (in the peaks).

    Historically a railway would have operated 1 or 2 trains per day Norwich – L’pool and they would have been lengthy – anyone wanting to make that journey on a through train would have been expected to organise themselves to go at that time. There would have been extra trains Manchester – Nottm to carry the extra market share.

    But current model is frequent short trains at equal interval pattern (which is logical in a world where people’s other option is to take car at time that you like) – but the two approaches are somewhat incompatible (and must result in higher staff costs?).

    Interesting some of the pressure must have been taken off the Nowrwich – Ely leg of the EMT Liverpool trains by introducing the Norwich Cambridge service on Anglia. Nottm – Sheffield should have been reduced by the newish Nottm – Leeds through Northern Train (but since it takes longer than a change to XC at Chesterfield it does not show up on journey planners as the fastest option so not sure how busy it is for through passengers).

    A logical approach would be splitting and joining extra sets for busy legs but that requires good timekeeping along the route – hard with long routes but managed frequently on Southern (and its predecessors) on routes with Haywards Heath a regular splitting / joining point.

  • Peter

    I don’t suppose many turkeys would vote for Christmas if they had the chance.

    So it’s no surprise that people who grow fat off this country’s railways want to carry on with the free ride that they get from “privatisation”.

    The way things stand at present, the profits are privatised – the costs are socialised. A very nice business model for a select few.

  • John

    Why is Network Rail being encouraged to trot out predictions of travel ? Richard Eccles is not a transport planner. File on Four programme (a week ago) had GMITA saying that ‘the railways’ do not understand urban use of rail and NR’s case (that said nothing about urban rail) was put by Paul Plummer (financial institution background). Why DfT, who according to their website are managing the strategy, are counting railway carriages rather than seeing how rail forms part of a door to door journey (not necesssarily including a car), should be explained.

    It cannot be denied that Network Rail are an excellent organisation, but shouldnt they be directed ?

    Dan’s interesting post covers the botched way capacity on trains is approached and he is clearly not acquainted with the ‘skip stop’ madness (eg Kendal to Oxenholme to Penrith now almost impossible) that puts rail in a sort of world of its own transport service.

  • Dan

    John – no not experienced ‘skip stop’ issues. Clearly it would be barmy if you were on a train or awaiting one. It maybe ToC’s I use do not do it much. I think there is some perfomrance penalty when it happens – but since it is presumably to avoid a different lateness performance penalty I guess the incentives are there to do it.

  • Christian Wolmar

    Oooh,Peter, great little aphorism – the profits are privatised, the costs are socialised. Nice one. Read my latest article in Rail which has attracted several favourable comments.Will be on the site in a couple of weeks.

  • Matt

    “the profits are privatised, the costs are socialised.” also applies to the state bail out of banks

  • Matt

    Christian – I did like your piece in Rail Magazine. I wonder if Mr McNulty comes to the same conclusion on the industry structure, or like Tom Winsor, he thinks that it is all solvable by better regulation.

  • Greg Tingey

    It would appear that cruella de Villiers is a total disaster, btw.
    There are reports of her mishandling/misleading/giving totally wrong information out, that do not reflect well on her.
    And, for that matter on the plonkers in DAFT (sorry, DfT) either…..

  • Anoop

    Just take a look around the world, or back in history, to confirm that vertical integration is the only way to run an efficient railway. This is because the railway is an incredibly complex system with multiple interfaces (track/train, signalling, timetabling).

    Also, upheavals and reorganisations tend to put railway improvements back by 10-20 years because of the loss of ‘corporate memory’ (i.e. experienced railwaymen are forced to move to new posts in which their accumulated experience of a particular stretch of line are forgotten; some may choose to retire or leave the railway).

    A few examples where vertical integration worked:
    – the ‘Big Four’ British railway companies pre privatisation
    – the latter years of British Rail
    – Japanese private railway companies
    – European railways

    The real question is: Is the railway primarily a business or a service? Should the needs of passengers outweigh the desires of corporations to use railways as a means of generating profit for themselves?

  • Peter

    @John:

    “It cannot be denied that Network Rail are an excellent organisation”

    Yes it can.

  • Peter

    @Matt:

    Indeed it does.

    Which is why its such a dreadful idea – and certainly can’t be called “privatisation”.

    Corporatism is probably a better word.

  • RapidAssistant

    It’s almost paradoxical in a way that in order to have a true privatisation model for the railways it would have to be 100% deregulated which would probably mean there would only be the long distance routes, freight and possibly London and the home counties left operating – yet to successfully deregulate the railways you have to re-regulate even more than was needed under public ownership in order to protect the public interest…….perhaps that is the ultimate flaw in the whole model.

  • Peter Davidson

    “It is also clear that there is a widespread feeling the HS2 is a given – ie. that it will definitely go ahead. That’s because of the sharp and continuing increase of people travelling on the railway.”

    Happy to see this reality check on your part Mr. Wolmar

    Given this profound change in circumstances (from your perspective) perhaps your next article focusing on High Speed Rail (HSR) will actually make some constructive suggestions about how HSR can be rolled out in a more effective manner so its benefits accrue to a wider section of the UK population?

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