Rail 667: Co-op structure could be answer to rail’s problems

I have a dream.  I have a dream that one day the railways will be an efficient and cost effective system of transport run by people who care about the passengers it serves.  In theory it should not be too difficult to make this come true, but in reality the obstacles which range from political indecision to ridiculous European rules, appear insuperable.

One of the key barriers is the structure of the industry. It was created to set the various players against each other rather than creating the co-operative structure that is needed to make a railway effective.  However is afoot and clearly both politicians and railway managers are in a mood to discuss possible solutions. Unfortunately, as the debate rolls on, it seems to get more complex and more impenetrable while ever more detailed discussion papers and analytical reports ebb and flow. The man tasked with sorting it out is Sir Roy McNulty, who was charged by Lord Adonis to come up with ways of cutting costs in the industry and his report is now expected to be published in early May.

There’s been no shortage of attempts to influence him.  Network Rail, indeed, seems to have jumped the gun by announcing in February that its route directors would be given greater powers over spending and be allowed far more autonomy than in the past.  In making this move, the new boss of Network Rail, David Higgins, said: ‘Each new route managing director will, in effect, be running their own infrastructure railway business with significant annual turnover and resources’.

This seemed to embolden the Association of Train Operating Companies which hot on the heels of the NR announcement released a brief document suggesting that Network Rail should be broken up into 10 separate infrastructure companies, each big enough, according to the document, to make it into the FTSE list of 250 biggest businesses in Britain.

ATOC’s suggestion is nothing if not radical, with the idea that in some areas these new mini-NRs would form vertically integrated businesses with the local train operator – Anglia, Scotland, Kent, Merseyrail and South West Trains are all suggested as possible places where such integration would be easier. The inclusion of the latter is no coincidence as Stagecoach, which runs South West Trains, has been pushing for the notion of vertical integration, under the control of the train operator of course, for some time.

Therefore two models of a devolved Network Rail are on show with, as ever, various players in the rail industry singing off different hymn sheets.  Taking a step away from this infighting, however, the issue that confuses me is why all the various players seeking reform of Network Rail think that it is sensible to impose yet more fragmentation on an industry whose main problem, since privatisation has been, well, fragmentation. The idea that there is much to be gained from getting ‘contestability’ – a favourite word of the reformers – between different Network Rail areas seems optimistic. Every area has its own idiosyncrasies and history, making comparisons difficult. ATOC’s suggestion, therefore, appears to be too far reaching and unlikely to be endorsed by McNulty.

On the other hand, Higgins has clearly decided what way the wind is blowing and pre-empted McNulty’s recommendations. When I dropped into his office for tea the other day, I had not done my homework properly as I asked him whether he was in touch with McNulty. The slightest bit of digging on my part would have revealed that the two worked together at the Olympic Delivery Authority where McNulty was deputy chairman and Higgins’ face lit up when he said that ‘they had worked very closely together and were in touch’. So its hardly likely that Higgins’ reform will differ much from McNulty’s recommendations and the more radical suggestions from the likes of ATOC will be sidelined, though there may be moves towards an integrated franchise for Merseyrail and possible one other area.  Clearly, the raw politics is that Higgins has McNulty’s ear, while the train operators appear to be out on a limb.

My own ideal would be to support moves towards creating co-operatives in the rail industry. Network Rail lends itself perfectly to such an idea, since it is already a company limited by guarantee which reinvests its own profits. Train operators, too, could be run by a mix of staff and various ‘stakeholders’ and from research carried out for the pamphlet I have just written on the subject – available at http://www.uk.coop/rail – the public would be very supportive.  Unfortunately, though the government has made positive noises about the John Lewis model, this does not seem to have translated into the detailed groundwork that would be necessary to bring this about. There all sorts of legal and financial obstacles, especially to creating a train operator co-operative, which would require genuine and thorough commitment from the government to overcome.  As often is the case with politicians, they talk big but think little. So I’m afraid my dream will probably remain just that, and instead we will get endless fruitless discussions about how to break up even further an-already overfragmented industry.

Why the railways are the ultimate Aunt Sally

I was a consultant on the Dispatches programme screened on March 21st with the daft title of ‘Train Journeys from Hell’ which unfortunately was imposed on the production company by Channel 4. While I endeavoured to try to ensure the railways were not lambasted unfairly, the industry scores more own goals than you might see in a whole season of watching Sunday league soccer on Hackney marshes and not surprisingly these were pounced upon by the TV researchers. Indeed by the time you have read this, I will have spoken at a conference organised by the Association of Train Operating Companies to try to improve the image of the railways held, without irony, on April 1st.  There will be much to say!

Watching Richard Wilson, who fronted the programme, learn about the various  – how can one put it? – eccentricities of the railways was instructive. He was broadly sympathetic to train travel and therefore genuinely shocked at some of the failings of the railway industry.

Here’s three things highlighted in the programme that the industry should consider for urgent action: .

1.       Reduce the ridiculously high level of walk on fares which have just gone through the stratosphere as they are unregulated. Nothing can justify a second class return London -Manchester at £279, or indeed, as I paid the other day, £94 return London -Peterborough. It just attracts the kind of negative publicity in the TV programme and, according to the companies themselves, does not bring in much income since hardly anyone pays these amounts except those who have no choice,  in other words who are victims of a monopoly.  Create a maximum fare – say £60 single maximum to Manchester  – which would then be the basis of a fantastic advertising campaign.

2.       The train operators must stop treating users – especially tourists, as highlighted by one example in the programme – as criminals and fraudsters if they travel on the wrong ticket. The imposition of the maximum full fare on any passenger travelling on the wrong ticket, without taking into account what they have paid already,  is tantamount to demanding money with menaces.

3.       Get to grips with the complexity of the ticketing system and make it easier for people to understand. For example, shock horror, how about specifying the hours when an off peak ticket can be used on the ticket itself? And trying to standardise, if not the times, at least the rules.

Interestingly, by complete chance Richard Wilson forgot his senior rail card and ended up having to pay over £100 for his trip to Sheffield when the ticket had originally. When he rang up about a refund, he was told this was not possible.  This is not only bad PR, it seems to be utterly unethical. Sure, by all means charge an administration  fee to people who have forgotten their cards, but not to refund such large sums of money seems ethically just plain wrong.

When I blogged about this, most people were sympathetic although a few took the train operators’ line that ‘rules is rules’. To their credit, the Association of Train Operating Companies gave me a detailed response to the effect that TOCs do sometimes show discretion but on ‘a case by case’ basis. It goes on: ‘Understandably people don’t always read through terms and conditions that closely’ but it does say clearly in the leaflet that the Railcard must be carried. It adds:  ‘There is an admin cost associated with refunding passengers. Not that significant a cost for one instance, granted’. Indeed, so charge that, not the whole fare

The response concludes: ‘We know that the vast, vast majority of people who travel by train (Richard Wilson included!) aren’t trying to pull a fast one – that’s why TOCs do show discretion. However, there is a small minority who will try to find ways to cheat the system’.  Indeed, but they do not include people who have a railcard and have forgotten it, or mislaid it.  As I said, own goals seem to be the train operators stock in trade.

I would, by the way, like to hear a louder voice from Passenger Focus on these issues. This is a case where most of the public would support the notion that the rail companies are being unfair and that the rules should be changed.

  • The solution to fare complexity is surely to make railway staff who sell someone a ticket more expensive than is required for their journey liable to criminal prosecution for theft (on a strict liability basis, so that “I thought it was the cheapest ticket” is not a defence). The train operators would then have to simplify their fare structures radically in order to protect their employees.

  • Guest

    Are we counting the “Cheapest” fare as including split tickets and all the other anomalies? Unfortunately the ticket structure has far to many anomilies to be completely simplified – every station generally has two fares (single and return) to every other station as a minimum – to try and accurately simplify it is going to be a nightmare. I agree it needs a large amount of simplicifation but you are *always* going to have anomlies due to the sheer number of fares produced.

    Secondly your suggestion is not particularly helpful – people make mistakes, even the best Guard, or lack enough knowledge of the fares. If this suggestion was accepted a Guard could be prosecuted for either making a simple mistake (yes, they do happen…) or for not knowing that its cheaper to split the fare in 3 different places (again it does happen!) or for not knowing the restrictions for say, Dover, when the Guard is based in Manchester.

    This is to say nothing of malicious prosecutions – again they do happen – along with claim and counter claim as to when and where a certain ticket was sold. Its a potential legal minefield.

    And finally when a large percentage of Guards are been dragged through the court system whose going to run the trains? We are need for safety, as well as revenue and customer service reasons in large parts of the country and if we’re all been prosecuted for ticketing issues then trains will be cancelled.

    I agree action needs to be taken to simplify the ticketing structure – but adding in the threat of prosecution for Guards, or staff members who make mistakes or don’t know every part of the national ticket structure is a bad idea. The simplest way would be for DfT to make a contribution and sort the issue out by legally forcing the TOCs to do it directly rather than by suggesting indirect means.

    Disclaimer – I’m a Train Guard.

  • Jon France

    Surprisingly this March 21st 2011 episode of Dispatches is not available on 4OD,
    despite “Beneath the Veil” being available from Thursday 26 Jul 2001.

    I wonder if the Association of Train Operating Companies has had it removed?

  • Nigel Blumenthal

    Your piece about Richard Wilson’s experience with having to pay an exorbitant amount for having forgotten his railcard was interesting. And it made me think – yes, the TOCs will claim that they are put to expense if people put themselves in situations where they can’t prove that they’re entitled to a fare, but, as you quote, “not that significant a cost for one instance, granted”.

    It seems to me that the amount demanded by the TOC was not in fact covering their extra costs, which is reasonable, but is charged by way of a penalty. I don’t know whether the legislation or the operating licences under which they work allow the operators to levy a penalty, but I suspect they don’t. Here in Canada, for example, several government departments and quangos have had their knuckles rapped for effectively charging penalties, which are illegal under the legislation that governs them. Could someone check – this may be a fruitful avenue of appeal for people who are as upset as Mr. Wilson at this exorbitant gouguing.

  • Rhydgaled

    Co-op structure? longer franchises? spliting up Network Rail and possibly selling it to train operators? Why does McNulty not seem to have looked at the posiblity of bringing back British Rail? If they had carried on and passenger numbers and fares had risen the same amount as they have the subsidy could have dropped to under £1bn p.a. by now. Longer franchises sound slightly better (though still totally loony because it isn’t a nationalised industry) on paper, but the Arriva Trains Wales franchise was long yet they are providing what they said they would in the contract. Never mind that services are overcrowed, they won’t bring out their spare mark 2 coaches (ok, they would need two locos on each train because they don’t have the Driving Brake Standard Open coaches to allow push-pull operation and most services in Wales require a reversal) as that would cost money and they are not required to deal with passenger growth by increasing capacity.

  • Anonymous

    Unfortunately the problem here in Britain is that TOCs are obsessed with stamping out every last penny of ticket fraud, and it probably becomes a law of diminishing return – has anyone tried to quantify the true overall return on the costs of barriers, administration etc. not to mention the loss in terms of ill-will towards the TOCs as a result of their treatment of their customers that makes people want to play the system to ‘get their own back’ either legally or illegally?

    As CW says, surely if they offered a sensible walk-on return fare, people would respond positively to it.

    London to Scotland for £15 one way is meaningless if the train neither arrives when you want it, nor if you have to be glued to your PC screen like the dying seconds of an eBay auction the minute it hits the 12 week deadline…..

  • Peter

    “Network Rail, indeed, seems to have jumped the gun…”

    In a very cynical move quite clearly designed to prevent the very reform that is needed.

    This bloated quango has had years to get its house in order but its bosses have chosen to keep their window seats on board the gravy train. Why should anyone take them seriously now?

    Break this “Zombie British Rail” up now and be done with it.

  • And if you’re not *sure* that the ticket you’re selling someone is the best ticket for their needs, your only proper response is to say “I don’t know what kind of ticket you want, so travel for now, and sort it out later with someone who understands the fare system better than me. ” Which would also, handily, render you completely immune to prosecution.

  • Paul Holt

    “…demanding money with menaces…” sounds similar to the tactics used under the guise of ‘parking enforcement’.   But there is hope: http://www.mailonsunday.co.uk/news/article-1386568/How-I-took-parking-Nazis-won.html