Fragmentation is the problem, not the solution

Here is a bold prediction about today’s report into cutting costs on the railways: whatever it finds, passengers will suffer.

Sir Roy McNulty, the businessman turned quango junkie, was asked by the previous Government to find ways to curb costs on the railways, which have ballooned from £1 billion a year under British Rail to five times that level of subsidy now.

His preliminary findings revealed a shocking state of affairs. Maintenance work costs 40 per cent more than in mainland Europe; costs for basic tasks such as rail replacement, where technological progress should have brought a 2-3 per cent annual reduction, remain unchanged since privatisation in 1993. Meanwhile Network Rail, which is paid for but not controlled by the Government, has a debt of more than £20 billion and rising.

Most of the proposals leaking from Sir Roy’s team will make commuters splutter into their muesli: ticket office closures, higher fares, reduced services, even possibly — although very unlikely — line closures.

The only suggestion that passengers may savour is the idea that the unions will get a kicking and their Spanish practices will be abolished. In truth, that is a thin political wrapping on an unpalatable package. The unions are inviolable. Train drivers’ wages have soared to £40,000 a year because operators, backed by the Department for Transport, have bought off threats of industrial action by acquiescing to their demands. Ironically, by creating more than 20 separate operators, privatisation gave the drivers real industrial muscle and there is nothing that Philip Hammond, the Transport Secretary, can do about it.

In fact, when it comes to costs, the proposals are likely to be modest, saving a mere £1 billion annually by 2018-19. This suggests that Sir Roy will not tackle the system’s fundamental problem — which is fragmentation.

Forget privatisation. It is a separate issue that often obscures the reason for the mess created by the Railways Act 1993. Essentially, railways work best as a unified business. No end of tinkering with legal contracts and myriad interfaces scattered among a series of operating companies will address the problems caused by separating the track from the trains.

Take one example. Virgin Trains received tens of millions of pounds in compensation from Network Rail when the West Coast Main Line was closed at weekends during the recent upgrade to allow faster services that ultimately benefited its passengers and greatly boosted its income. Where is the financial sense in that?

Or look at how engineering work is currently carried out. Under BR, track engineers would produce a list of work that needed to be done, categorised according to urgency and assessed against the available budget. These days Network Rail does not make such fine judgments. It gets its money in huge dollops every five years and its only remit is to spend it — whatever the state of the industry’s finances.

I have been told that even for the most minor schemes no fewer than 14 people turn up at meetings, where they have to fill in a heap of forms on risk assessment and best practice. Decisions are then made by people sitting at desks hundreds of miles away from the site of the dodgy culvert or ageing bridge. Their priority is to cover their backs, so the work is done whether it is needed or not.

To be fair, David Higgins, the new head of Network Rail, is trying to address these issues by devolving responsibility to local managers. But even if he does find savings, it will be years before they percolate through to the overall balance sheet. That’s the problem with a fragmented industry. Shut a ticket office and the train operating company benefits from the saving, not taxpayers or passengers.

In the days of BR, services were reduced during a recession as demand tailed off. Now, contracts preclude that. Remarkably, during the volcanic ash crisis, Southern, which operates the Gatwick Express, asked the Department of Transport if it could cut services from every 15 minutes to half-hourly because nobody was going to the airport. The answer was: “No, you have to stick to the contract.”

Passengers face having to pay the price for this inefficiency through fares, which are set to rise by 8 per cent next year, cuts in staff and the postponement of the introduction of new rolling stock. Don’t believe a word about fare rationalisation; instead expect increased fares at peak times, fleecing the commuters who are victims of what is, in effect, a monopoly.

There is only one way back to a rational cheap railway. Bring all the disparate parts together under unified control. Whatever Mr Hammond may say, that cannot be done without reintegrating the track and the trains. Until then, the billions will keep seeping away.

  • David Gibson

    Christian Wolmar knows it, most railway journalists know it, the much-maligned railway enthusiast (who knows more about the railways and it’s problems than the average voter and infinitely more about them than the vast majority of politicians and the Department for Transport) certainly know it; the privatised and fragmented Railway does not and never will work.
    It was perpetrated through dogma by the Tories, disgracefully perpetuated by Labour, and now the Tories (forget the LD’s) are trying to re-sell the myth that privatisation brings efficiency and lower costs, both now disproved beyond doubt. The Tory ideology now depends on a generation of voters who never knew British Rail and think the present over-priced, over-crowded innefficiant mess is how railways in this Country have to be.

  • Paul Holt

    “…expect increased fares at peak times…” sounds like congestion charging.   Is CW in favour?

  • Carl

    Apart from the sniping at the rail unions, good article.

    We’ve been over this before and no doubt will go over this again, but the unions cannot be blamed for grabbing as much as they can from the increased growth and profits enjoyed by the rail industry since privatisation.

    Railtrack/Network Rail managers, the TOCs and the infrastructure companies have all enjoyed massive profits over the years from increased growth, income and government investment, why shouldn’t the unions get a piece of that? Bob Crow’s job is to secure as much benefits and job security for his members as possible. Unlike certain Network Rail people I could mention, his members have earned it.

    You make cracks about “Spanish practices” (without producing any evidence of what those alleged practices are), yet TOCs like Virgin Rail get tens of millions of pound in unearned “compensation” and none of that is called a “Spanish practice” at all. If Spanish practices exist, then the entire rail industry are in on them and you should be holding all the players in the rail industry to the same ethical financial standards and comparing like with like and putting each side’s benefits in their proper proportions. How many millions has Bob Crow’s union ever got out of  the WCML closures? Part of Bob Crow’s job is to prevent his employers from setting precedents in terms of pay, pensions and conditions that employers can use to drive through casualisation, that same casualisation that has destroyed terms and conditions elsewhere in the transport sector, not to mention health, teaching, car, coal, steel…………….

    Yes Bob Crow is a big mouthed blowhard, most of the time. But the threat of casualisation of jobs and dilution of terms and conditions is real, more real than it has ever been. He is not just crying wolf. At least not all the time. In fact the rail unions have been extremely clever in how and when they use the strike weapon. Successive governments’s insistence on higher fare, disintegration and dumping the financial consequences of the mess they have created of the rail track and train system upon the fare-paying public is down to government, not the rail unions. If you want to attack the rail unions then attack them for the those industry shortcomings for which they are actually responsible.

  • This is the one of the big problem that the country is suffering this days, with the majority knows about it.