Public bad, private good – or is it the other way around?

In his George Bradshaw lecture given at the Institution of Civil Engineers in October, Tim O’Toole, the boss of FirstGroup emphasised that the key reason behind the growth of the railways in the past 15 years was the fact that they were in the private sector. Moreover, he argued that it was the very complexity of the railways created by privatisation that has delivered that growth and therefore, the fragmentation and break up of the industry created by the sale must be retained.

In the lecture he stressed: ‘The industry structure that best promotes the aspiration and drive for growth is one that involves private, Train Operating Companies (TOCs). Private TOCs must deliver growth to survive; a monolithic, publicly owned authority doesn’t have to.’  He characterised British Rail as having ‘a dated mindset that the railway is ours, that its residual purpose following the end of British Rail is to remain the sustaining engine of the only thing to which some truly owe allegiance, the pension plan…In other words, growth is just a further burden instead of an ambition and reward.’ Gosh, bet he never said that to his workers and managers in London Underground which he ran from 2002 to 2009.

He then spoke about how complexity had also been a source of growth: ‘Our industry has become very complex with multiple TOCs and FOCs where once there was one authority, and its complexity is set to increase with Network Rail’s devolution, but the greater complexity has generated and absorbed the greatest sustained growth in passengers in history.’

In other words, it is the mix of privatisation and the complexity which it brought in its wake that has been the catalyst for the recent success of the railways. I could not disagree more with both propositions, even though Mr O’Toole is a man for whom I have enormous respect.

When Mr O’Toole ran London Underground, he did so with real dedication to public service and he did much to improve the service such as putting up those boards setting out service delays on every line at each station. It was a period of growth during which, for the first time, the London Underground reached the figure of 1bn users in a year, and that number has continued to rise.

During Mr O’Toole’s time at the Underground, I used to meet him regularly and he railed against the Public Private Partnership that had been created by the Labour government which involved separating out the operations, which remained in public hands, from the infrastructure. When he left to go back, temporarily as it turned out, to the USA, I interviewed him for the Evening Standard (on my website, 17th April 2009) and he was strongly critical of the whole arrangement: ‘So many things about the PPP were wrong. Separating the track from the infrastructure was wrong. The theory was that these private companies would come in and introduce all this innovation but fundamentally we have not had the level of innovation that justifies the extra cost of the PPP.’ He added that far from innovating, the private companies had played safe and not introduced risky new technology but rather have milked the system for what they could get.

Now, though, he suggests that public sector companies lack the impetus and drive to grow, and only the private sector has the vision and desire to promote expansion. He said ‘ there is a fundamental difference in mindsets between entities that are trying to make money and those whose central purpose is to spend it. Over time, the latter simply lack the day to day obsession with finding ways to grow.’

Let’s though, examine this proposition. Take, for example London Overground which while being run by a private company works entirely to the specification of Transport for London. It is a concession rather than a franchise and thanks to investment, good marketing and station staffing it grew by a staggering 110 per cent in the first year after it reopened and already extra coaches on the trains are having to be provided to meet demand.

Then there is Directly Operated Railways which has been quietly running the East Coast franchise for the past three years and was on standby to run West Coast, until at the last minute a deal was reached with Virgin. DOR took over a poorly run franchise and has had notable successes. Passenger numbers between London and Edinburgh have risen by more than a third and recently the company celebrated the best ever monthly performance figure, which has consistently been higher than Virgin’s efforts on the West Coast. Oddly, too, East Coast is top of the league table of complaints, but according to Passenger Focus many of these apparently relate to overzealous checking of tickets, something which is not suppose to happen in the O’Toole world of public sector management.

Possibly most interesting is the often forgotten example of Northern Ireland. Because of fears of arising political difficulties, the small railway of Northern Ireland has remained a publicly owned integrated operation which has recently benefitted from investment in both rolling stock and track.

Passenger numbers there have increased by 70 per cent over the past decade, an even higher rate than on the mainland, thanks in part to the investment programme and there are plans for further expansion and growth.

Mr O’Toole, who is also head of the bizarre Rail Delivery Group which has the task of delivering the cost reductions required by the McNulty report, seems on an ideological path up the wrong track.  The result of the West Coast omnishambles is that for the next two years Virgin will be running the basis of a small management fee, just 1 per cent and the company has promised that the money will go to good causes (not, one hopes, for wildlife management on Branson’s personal Necker Island in the Caribbean). It will, therefore, not be a franchise but effectively a concession like London Overground which actually points the way forward. If the next Labour government proves to be too timid to actually take back the franchises into public ownership which is the obvious solution to this mess, the party could see concessions as the ideal compromise. No longer would we have the tortuous bidding process based on the voodoo science of futurology, but a much more easy process that would be far less costly and complex.

 

 

Christian Wolmar is seeking the Labour nomination for the London Mayor election in 2016. If you would like him to address your branch meeting, email him at christian.wolmar@gmail.com

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