Rail 687: Fares becoming political

The annual fares rise caused rather more uproar than usual, and remarkably led to a partial retreat by the government. This suggests that the policy of increasing them even more steeply next year may be reversible, especially now that there is a Transport Secretary who has rather more sensitive political antennae than her predecessor.

The case for these rises is weak, and the line taken by the Association of Train Operating Companies that the money is going towards investment in the railways is not credible, and consequently does not wash with the public. My stepdaughter, Robyn, summed it up neatly over the dinner table recently when she said: ‘Why are the fares going up so much without the service improving?’

The argument that the money is being spent on the railway ends up reflecting badly on the train operating companies, too. When I was on a radio phone-in when the precise level was announced, it was clear that most of the callers thought that the operators were coining it from these rises and that it was down to them. This reflects badly, too, on the railway at large. If ATOC were a proper trade body, rather than a supine organisation always scared of biting the hand that feeds it, the press release would say something like: ‘These increases are a pain in the neck: they are imposed on us by government and there is nothing we can do about them. We would much rather be offering our passengers better services for the same money, but we are not allowed to do that’.

Instead, we get ‘the long-standing government approach to sustaining rail investment is to cut the contribution from taxpayers and increase the share paid for by passengers. The industry is working together to continue cutting costs as a way to help limit future fare rises and offer better value for money for taxpayers over the longer term’. Bland or what? It seems that ATOC is presenting itself as an arm of the government rather than as a representative of the train companies and their owning groups. Oddly, just as I was writing this, in plopped more guff from Michael Robert, the head of ATOC, in response to Passenger Focus: ‘Money raised through fares helps to pay for better services. For a number of years, the Government has sought to sustain investment in the railways by reducing what taxpayers contribute and increasing the share that is paid for by passengers.’ In fact, the money raised does not go to pay for ‘better services’. The income from these increases is subject to a negotiation process between operators and the government, with the intention that the money should not benefit the operators, apart from estimates on the losses from passengers who are deterred from using the railway by the high fares. There is, therefore, only a very indirect relationship between the income from fares rises and money available for investment, especially as, by and large, the investment programme for the railways is set in five year chunks well in advance of political decisions on fares levels. The extra fare revenue goes to the Treasury which may, or may not, give some back for railway investment.

This is, therefore, a missed opportunity. The retreat on the fares rises, which was originally to be RPI + 3 per cent, was cut to RPI + 1 per cent in the Autumn Statement. This was, admittedly, partly because the Department for Transport was heading for a big underspend on its budget, and the last thing a minister wants is to hand back money to the Treasury at the end of the year. It was, though, also a response to the fuss that was being generated by near 10 per cent rises at a time when people’s wages are stagnant or worse.

Perhaps it is time for ATOC to think about splitting itself into two – a statutory organisation to run the various ticketing schemes which it is obliged to do and a lobbying arm fighting for the train operators and, indeed, the wider railway.  In fact, the opportunities for a body like ATOC to lobby for the interests of the railway, rather than simply mouth platitudes is demonstrated by the government’s recent change of direction on two other important railway matters. First, there was the leaking of the plan to tunnel over an extra part of the HS2 route at an estimated cost of £500m, though figures in relation to the project are necessarily vague. This suggests that the fierce lobbying from within the Tory party is paying dividends and that the plans could be changed as time goes on.

Look, too, what has happened with Bombardier. The desperate attempt to push some orders its way after the fuss over the Thameslink order resulted first in talking up the idea of fitting pantographs on to Voyagers to enable them to use electric power when under the wires, and then rushing through the order for 23 extra trainsets – though hardly enough to keep a production line going for six months but good PR – for Southern as a result of the delays stemming from Thameslink.

There is an air of panic about the Department.  Ideas have been bounced by ministers with little idea of the consequences. Hammond’s suggestion of joining Heathrow and Gatwick with a high speed line was just one example. Electrifying the route across the Pennines and recreating a West – East line to eventually reconnect the Oxbridge cities mentioned in the Autumn Statement may indeed be a great ideas, but clearly they look as if they were plucked from the air by ministers desperate to show they were doing something.

This all suggests not only that there is much uncertainty in the government on its rail policy, but also that ministers are very open to change their minds in the face of well-founded arguments. Philip Hammond, as I mentioned before, was, according to sources close to him, far less decisive and certain about his intentions than the image he liked to project (God help the armed forces!). When he was interested in a particular topic he would spend hours in discussions examining the issue. For example, he examined in enormous detail the rather obscure issue of the lane rental scheme for road works in London which allows Transport for London to charge utilities for the disruption they cause. He had half a dozen meeting with senior TfL executives before agreeing that the scheme could go ahead. Yet, on the other hand, he left in his in-tray a vast number of issues on the railways for Justine Greening to progress – or not – because he was not very interested in them.

Therefore, it may well be that the various delays to policies (which I outlined in the previous issue of Rail) it may simply be that the Government – both ministers and civil servants – has no idea what to do about key issues such as franchise reform, cutting costs in accordance with the McNulty report, fare levels, rolling stock policy and so on. Time and again, the ministry of railways – for that is what the Department for Transport has become – has shown itself incapable of running the rail system which is part of its role under the current arrangements.  Perhaps Justine Greening would do her and her colleagues the biggest favour by suggesting that the time has come to recreate a slimmed down version of the Strategic Rail Authority, staffed by full-time railway people, in order to make these decisions. So, here’s a hint to the Rail Delivery Group: why not suggest this idea to Ms Greening and, therefore, get yourselves out of doing an impossible job? To sum up, we need a proper lobbying organisation for the railways, and a proper structure to run them. Simples.

Northern Line black hole

The story of the proposed Northern Line extension to Battersea, from a spur at Kennington, is yet another demonstration that when it comes to rail planning in the UK the tail is often wagging the dog. The plan is for a line that would serve new developments at Battersea and was mentioned as a key project by George Osborne, the Chancellor, in his Autumn Statement.

However, almost as soon as he mentioned it, Treasury Holdings (which has nothing to do with the Treasury), the main developers of the Battersea Power Station site, which has remained empty and decaying for nearly three decades, went bust and the future of the area is now, again, uncertain. This was very curious as either Osborne must have known that the scheme was about to collapse and yet pursued the idea for PR purposes, or he was ignorant, in which case the Treasury is frighteningly badly informed.

Osborne, and Boris Johnson, the Mayor of London, have both claimed that the project – variously estimated to cost between £500m and £800m – would be funded by the private sector but, in fact, the developers only ever put up around £200m, suggesting that the rest would have to be raised through a complicated change in the legislation on planning gain. Ultimately, given the failure of the developers, and the basic economics of building underground lines, it is highly unlikely that the scheme will be built without considerable public support, even if it is provided in a disguised way.

That is not to say that the idea is totally misconceived. However, It would make much more sense if it were extended to Clapham Junction, which has no Underground connection, but there is no private money available to do that, and if the issues of overcrowding on the Northern Line could be addressed. This looks like a repeat of the Jubilee Line Extension story. There, the line was backed by the Government because developers were prepared to lob in a few million –ultimately less than 2 per cent of the ultimate £3.5bn cost – and it was given priority over other more worthy schemes such as Crossrail and Hackney – Chelsea. Just as with the national railways, there seems to be a lack of any coherent strategy or planning on meeting London’s future rail needs.