It is time to play the blame game on the West Coast franchise fiasco. The guilty parties should not be allowed to get away with it, especially as they are largely politicians, rather than the civil servants who have been made to take the can quite unfairly.
I start with Alastair Darling, aided and abetted by that squabbling duo, Richard Bowker and Tom Winsor who were respectively boss of the Strategic Rail Authority and the rail regulator in the mid 2000s. The two of them were involved in a playground dispute over who was more important in the rail hierarchy over a variety of issues, but most notably the West Coast main line upgrade. Before it came to a duel in St James Park, Darling announced in July 2004 that the SRA would be axed. Winsor, a far cannier operator than the hapless Bowker (who went on to oversee the demise of the National Express franchise on East Coast) had triumphed but Darling had thrown out the baby with the dishwasher.
He announced proudly ‘the Government will take charge of setting the overall strategy for the railway…It follows, therefore, that the Strategic Rail Authority will be wound up, and that the majority of its functions, including all its financial obligations, will be transferred to the Secretary of State. The Department for Transport will take responsibility for awarding train operating company franchises. The Department will be restructured to reflect its new responsibilities.’ In effect, the civil service was taking over the railway and one of the regulators created at privatisation was effectively killed off.
There was, too, another mistake. Darling, a money man to his toes, was desperate to reduce the subsidy to the industry and said that instead of passengers paying 50 per cent of the cost of the railway, the proportion coming from the farebox should be two-thirds. This led to the Department seeking ever more optimistic bids from the train companies with the results that we all know.
The structure created by Darling worked OK when you had a minister, like Lord Adonis, who had the competence to oversee it properly. Indeed, it was Adonis who worked out a complex cascade of rolling stock that ensured the Great Western could be electrified – it would be difficult to imagine any of his three successors understanding that sort of process.
And it is the first of these successors who is next in the dock. Philip Hammond was one of those politicians who sound good and look as if they are on top of things, but behind the scenes they leave a trail of unhappy people trying to second guess what the boss wants and getting very little clue. Hammond, according to my pals, was fascinated by some aspects of his job – getting the utilities to pay for the ‘rental’ of road lanes when carrying out work was one of them – and utterly uninterested in others. Rail seems to have been largely in the second category.
So when the department was being reorganised and cut back, he did not realise that it was absolutely essential to have the old fat controller in charge. Instead, responsibility for the railways was split between two people which meant there was no one there to take control and, more important, bat for the railways against all the other calls on resources. So the numbers dealing with rail were severely and fatally reduced by a third.
Meanwhile, both in opposition and then as the number two in the Department, Theresa Villiers was banging on about longer franchises, despite being unable to explain what the rationale for them might be. There were vague murmurings about extra investment but, talking to the more honest rail operators, I always found utter scepticism about this premise.
So the West Coast became the perfect storm as laid bare by the Laidlaw report. As Anthony Smith, the head of Passenger focus put it, ‘there was too much going on. The workload increased and yet the numbers dealing with it had gone down. There was devolution of franchises and of Network Rail, the fares review, the Olympics, the need for new rolling stock, the massive programme of refranchising, discussions over Network Rail’s Control Period for 2014 – 19 and the demand for longer franchises which made the process even more complex. It’s no wonder it all fell apart.’
I’m afraid that it is all too predictable what Richard Brown, a very likeable but conservative fellow who is not going to rattle any cages, will come up with in the second report on franchising. He is charged with looking at the overall picture, but will undoubtedly say something like ‘all franchises are different, this was a bad mistake but basically if a few improvements are made, then all will be OK’.
That would be the wrong answer. As well as the West Coast, there are two staggeringly complex franchises coming up, Great Western and Thameslink which is being combined with much of Southern making it the biggest on the network. Both franchises will have new trains and major improvements: massive track investment leading to greater capacity on Thameslink and electrification on Great Western as well as the opening of Crossrail which will deliver far faster connections to central London. The growth potential on both franchises is almost unlimited thanks to public sector investment. Yet by franchising these lines out, much of the profit will go to the private sector. Ministers are perhaps conscious of this, and that is why we are in this mess.
Essentially, what went wrong with West Coast was that the government put it itself into an impossible position. On the one hand, ministers are very worried that the private companies will be able to make super profits if there is massive growth, such as happened on some of the early franchises. So measures such as cap and collar, the GDP deflator, and the variable loan arrangement are all designed to fetter the private companies, reducing their risk but also their opportunity to make unlimited profits. That means continued control over the operators’ activities, which is precisely what the new franchise regime was supposed to do away with.
On the other hand, ministers refuse to take the logical step of changing the franchising arrangements to a concession agreement whereby the risks remain with the government, as, of course, is happening for the next two years on the West Coast. This underlines, yet again, the fundamental problems that ministers, abetted by the civil servants, refuse to address. In his response to the Laidlaw inquiry, the permanent secretary at the Department, Philip Rutnam made clear that he reckons all this is a small storm that will blow itself out: ‘the issues identified in Mr Laidlaw’s report are specific to the West Coast competition and thereby the Department’s franchising programme, rather than being a cause for wider concern’. Yet, bidding for and letting these new franchises will be a ferociously difficult task and it is patently obvious that at least until the investment has been allowed to settle, they should be kept in the public sector with taxpayers taking the risk and probably benefitting from their investment. When, oh when, will they ever learn?
The strong hand of regulation
On December 13, a press release from the Association of Train Operating Companies plopped into my inbox boasting that £8m is to be spent from a joint fund on improving customer information by ensuring 2,000 screens across the country have ‘the latest ‘live’ real time train information data’. Not a king’s ransom, but it seemed to show good intent but I did wonder if it was really worth a press release. Was this not the sort of routine investment that should be happening all the time..
Ah, but here’s a coincidence. On the very next day, the Office of Rail Regulation issued a press release to launch its report on passenger information, which assesses improvements made by the train operators and Network Rail in providing information, especially at times of disruption. This little game over press releases is because the issue of passenger information was, in fact, the subject of a spat between ATOC and ORR last year. In December 2011, ORR decided to regulate on the issue because it felt that the operators were not doing enough on their own volition but it was pretty light touch stuff. There were to be no targets but, rather, rules which ‘require train operators to publish and follow codes of practice setting out how they will pass that information on to passenger’. A few gentle twigs rather than the birch, one would have thought. The ORR even tried to mollify the operators by saying that if substantial investment were required, then no action would be taken unless funds were available.
Yet, the response from ATOC was as if the train companies were being threatened with shootings at dawn. In particular, Michael Roberts, the boss of ATOC, was not a happy bunny and was quoted as saying ‘We are disappointed that despite acknowledging positive improvements to the quality of passenger information during disruption, the ORR is proposing new licence obligations for the rail industry.’