Rail 805: the four threats to the future of rail

‘We are waiting for our Railtrack moment, but we are very surprised it has not happened yet’. That was a comment from a rail industry manager to me recently and it very much resonates with my thinking at the moment. My source was, of course, referring to the moment when Stephen Byers called time on Railtrack in October 2001 by forcing it into administration and essentially caused its demise, much to the fury of the then regulator Tom Winsor.

In many respects, of course, we are living in happier times. There is much more of a consensus that the railways need investment and modernisation than there was 15 years ago, and services have much improved over that time. However, there is no doubt, that as Mystic Wolmar predicted at the beginning of the year (Rail 791) the railways are heading for a financial crisis and there will be enormous pressure to rein back on spending.

There are four reasons ‘not to be cheerful’ and which give me enormous cause for concern about the robustness of plans for improving the railway. First, Brexit, a decision so disastrous that even some of its key supporters, such as Kelvin Mackenzie, the former editor of The Sun, have now expressed public regret they voted Leave. Let me say that I don’t believe that Brexit will necessarily happen, even though Theresa May, confirmed as our new Prime Minister, has said it will. She will hesitate before pushing the button on Article 50, the legislation which everyone has now heard of and which will govern the process of leaving. There is a growing body of opinion that Parliament will need to decide, and certainly the current group of MPs is around 75 per cent opposed to leaving. The referendum was only advisory and was a snapshot of opinion on June 23 in the light of all kinds of claims that have now already been proved to be false – and nearly half the electorate voted to stay.

Therefore I disagree firmly with the defeatists who say we must abide by the decision and not campaign for a second referendum or for our politicians to vote against leaving in Parliament. The uncertainty over both whether we will leave and over the consequences of leaving is one of the ways in which the railways are affected by the vote. The railways are a long term industry requiring stability and certainty, and as a nation we now have neither. The first casualty, as predicted previously in this column could well be HS2. We have little idea of what May thinks about HS2 – indeed we have little idea of what she thinks about most things apart from knowing that she is a genuine old-fashioned small c conservative – but it may be that she is no great fan, or indeed, she may appoint a Chancellor and Transport Secretary who are not supportive. A source inside HS2 has told me that many of them fear the worst.

The economic fall-out from Brexit is also having an impact on the rail industry. Already output is being affected and it is no longer a matter of whether we will have a recession, but when it will start and how deeply it will impact the whole economy. Therefore this puts at risk both existing contracts with franchisees but, even more important, future deals – which brings us neatly to the second issue, franchising.

Note that franchising was already in crisis before the Brexit vote. The soaring costs of bidding allied to the increasing demands from the Department for Transport for maximum premium payments have made the process unappealing and consequently there have been noticeably fewer expressions of interest for recent contracts. The Treasury has already been intervening in the process, cutting back on passenger benefits which Pete Wilkinson, the franchising director at the Department for Transport, was keen to see included.

Now, with a deep and sustained recession likely, several existing franchise deals may be put into jeopardy, making companies who are losing money even less likely to be interested in bidding. Stagecoach (which is disguised as Virgin) is already in trouble on the East Coast as revenue growth has been around half the required 8 per cent and that is particularly concerning in the first year of a franchise contract because it is very difficult to make up in subsequent years.

New deals, too, have already been affected. Abellio was all ready to sign up for a renewal of its Anglia contract when the Brexit vote intervened. Its bid, and indeed those of its rivals, were all predicated on a Remain win and the company reckons that its revenue could be cut back by as much as 15 per cent, putting in jeopardy all financial calculations.  Now the whole thing will need to be renegotiated. The contract due to start in October was to include much needed new rolling stock and therefore passengers are likely to be directly affected by the Leave vote. Let’s hope that those who voted for Leave will feel a twinge of guilt – the prospect of Brexit is already costing the industry money and delaying hoped-for improvements.

Thirdly, there is the overall state of Network Rail and its inability to get a grip on its spending. Network Rail’s chairman, Peter Hendy, managed brilliantly to sidestep issues over the overspending on its investment programme. He promised to raise some £1.8bn through the sale of assets and cajoled another £700m out of government, but the costs still seem to escalate with the bill for electrification of the Great Western heading only one way. There is little sign that Network Rail has got costs under control.

Network Rail’s new tactic of ensuring it does not carry out enhancements is to put price tags that are so high that it will never have to undertake the work. I mentioned in Rail 798 how turning a couple of miles of freight line between Brentford and Southall in West London was costed at £41m which seems remarkable given the line is currently being used to carry rubbish from a processing plant. But now, in the Network Rail stakes (possibly this could be a regular competition), the latest most fanciful estimate is £28m to reopen Gilsland, a small station in Cumbria which Nigel Harris and I visited Hexham discovered when we visited Hexham to talk to the Tyne Valley Line Rail Users Group. They have been campaigning to reopen the station and persuaded Network Rail to do a desktop exercise which revealed that construction costs would be £12m, project management and other costs of £4.5m and risk (which includes unexploded bombs according to two pages of the 68 page report) at £8.5m.  The campaigners reckon that £3m would be more reasonable.

Finally, number four in this list of current threats to the railway is the current chaos on Southern. There is no doubt that all three parties involved in it – the Department, Govia and the unions – have played their part in causing this chaos. However, the fundamental point is that it is partly the result of the Department’s desire to cut back costs which has been set out in the management contract which Govia was given. Scotrail is involved in a similar dispute and this may well be the start of a wider attempt by government to break the unions hold on certain aspects of operating the railway. It is the last thing the railways need at this point but is indicative of the financial strain the railways are under.

Now, all this might disappear like snow thawing on a hot spring day but I’m afraid I doubt it. The key point, as I have stressed, is that uncertainty rules at the moment. Only one thing is certain. The railways are in for a difficult time over the next few months.

 

Wimbledon signal box

 

Travelling through Wimbledon the other day, I saw that the wonderful Art Deco signal box at the northern end of the platform is in a terrible state of decay. I had never really noticed it before but coming back from a recent cycle ride in Surrey I noticed the wonderful lettering on the side, so characteristic of the interwar period. The building is a fantastic and rare example of what is called Streamline Moderne and is known as ‘The Liner on the Line’ because it is in the shape of a ship.

It is, though, plastered with graffiti and the windows, always a key feature of Art Deco, are rusting away. The box has been closed since 1991 and is clearly in need of salvation. It is at the end of the platform and with some imagination it could be turned into a restaurant or gallery of some kind – though that would need Network Rail to ensure safe access.

I feel that promoters of railway heritage are often more concerned with older structures more characteristic of the early days of the railway, but the Southern Railways’ Art Deco heritage deserves more attention. The Wimbledon box, unlike several other Art deco buildings on the line, is not even listed. Time for a campaign, I suspect, to push Network Rail into ensuring its survival through a new use for it.

  • CorBlimeyJerkin

    Alas Christian, the public voted to leave and your diatribe against their stupidity appears on the website just in time for the actual effects of brexit to start coming through. Mystic Wolmar’s credibility on predicting the future seems rather shaky of late.

  • paulf78

    “Therefore I disagree firmly with the defeatists who say we must abide by
    the decision and not campaign for a second referendum or for our
    politicians to vote against leaving in Parliament.”

    I see little point in re-running the referendum. Had the result the first time around gone the other way (i.e. 52.1% to Remain) would you have pushed to re-run it? What happens if we get a similar result again (i.e. a Leave victory, albeit with a slim majority)? What happens if Remain win second time? Best of three? You can’t keep re-running a vote until you get the result you want. Really, we should lament that when the terms of the referendum were defined they didn’t require something more decisive than a simple majority. A slim simple majority result (e.g. 52:48) was always going to cause arguments which ever way it went whereas it’s much harder to argue the toss on a 65:35 result!

    The more important point is the referendum wasn’t legally binding. This is a matter for Parliament now and they are not bound by its result, although they would be ill advised to disregard the result completely. At the same time, if we’re going to have more referenda the idea of ensuring campaign claims aren’t wildly inaccurate would be a necessary step: http://www.bbc.co.uk/news/uk-politics-37238641

  • Paul Holt

    Would CW like to “…dissolve the people, and elect another”: https://en.wikipedia.org/wiki/Die_L%C3%B6sung ?

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