I have had lots of responses from readers about my article in Rail 849 about Network Rail selling off its supposedly non-railway assets in one huge lot of around 5,000 properties. Not surprisingly, they all think it is a bad idea.
I say 5,000 properties but in fact Network Rail does not even know how many sites are involved. One reader has enquired to find out the list of properties but discovered there is none. Network Rail told him that there was no precise list because, in a letter that this was ‘because it is changing as part of the live commercial transaction process’ and that there has been extensive calculation. So that’s all right then. An asset owned by the state – or rather you and me – is been sold off on as 125 lease without any scrutiny or even knowledge of its precise nature.
This would not be so worrying if this deal came about because of an assessment of Network Rail’s long term needs and the subsequent realisation that there many surplus sites that would never be needed. That is not the case, however. Rather, this is a fire sale, a desperate way to plug a gap dreamt up by Peter Hendy in order to satisfy demands from the Department for Transport and which, as I explained in the previous column, will actually leave Network Rail financially worse off but – wow – with a debt 2 per cent lower and still around £50bn.
John Pengelly, a reader with 40 years experience of dealing with railway property for British Rail and Network Rail points out that this sale comes after many previous sales of non operational assets. Pengelly therefore says that the idea of selling off the whole commercial estate owned by the railway had been considered many times over the years but was ‘always resisted, given the potential for adverse impact on the retained railway’. So many of the supposedly extraneous businesses and their assets, such as Sealink, the hotels, BREL etc have already been sold off along with huge swathes of commercial property that the remainder must, by definition, be problematic or why was it not disposed of before. In a letter written to me in response to the previous article, he says: ‘All of these sales have sought to strip out “non-core” assets to provide a financial injection, leaving only that which was essential for the running of a core railway. However, after consideration, the conclusion was always that certain assets were too intertwined to separate without major repercussions’.
With his knowledge of the estate, Pengelly says that this is a real ragbag of property: ‘Some sits on shared bridges (what happens when the bridge needs rebuilding?); some support the track (who is going to maintain them to stop the track slipping?); some provide access for mandated and intrusive inspections (what happens if access is denied?)…’ and so on. Then there is the potential for causing delays: ‘Improper occupier practices, such as leaking acetylene cylinders, can shut the railway – what is the incentive for a non-rail landlord to bother checking?’ Network Rail has claimed to have consulted widely but, oddly, not with the Association of Community Rail Projects, which is likely to be greatly affected by the sale of some of these properties.
The risks of something really disastrous resulting from this sale cannot be discounted. Another reader, who is an expert in railway structures, is acutely worried about the condition of many of the bridges and arches carrying heavy freight trains. Already, some of the properties under railway arches are difficult to inspect and this sale will obviously not make things easier. Quite the opposite.
He wrote to me: ‘Selling off the leasehold for 125 years is likely to lead to some major difficulties in very few years, since there may be serious defects already hidden behind linings and the new owners would surely have legal recourse for damages if defects were found after their purchase went through.’ He added that he is surprised that Network Rail’s engineers are not doing more to prevent the sale, given there are real risks involving some of the structures, particularly railway arches.
That begs the question of whether the safety authorities have taken an interest. Pengelly has, indeed, tried to get them interested but received a brush off. Although ORR has oversight of Network Rail’s commercial position and regulates land disposals, in response to Pengelly’s intervention, it replied: ‘The key test for submissions referred to us is whether there is evidence for a foreseeable railway requirement for the land concerned at the time of submission and consideration. This is to protect the implementation of future rail schemes where they are likely.’ In this case, however, since most of the sites relate to ‘airspace’ below arches, there was no need to intervene – euh, even though, Network Rail has not provided a full list of properties being offered in the deal. And as for ensuring Network Rail was getting good value for the deal, that was, the ORR said, beyond its remit – even though the financial health of the organisation is clearly ORR’s fundamental raison d’être. And basically, in terms of stations ORR said that ‘Network Rail will undertake all steps in accordance with the relevant Station Access Conditions’ should there be any change in the arrangements with tenants. However, as Pengelly pointed out to me, ‘This means that all those many Network Rail leased station houses, kiosks, shops and businesses that sit within station areas as part of the “commercial” estate will pass from “railway” control without a murmur of dissent’.
The key, too, is the future. As mentioned above, there are probably good reasons why these sites have not been sold off before. There might be a potential future use – look how railway managers and companies would dearly like to have control of many properties sold after Beeching – or they might simply be too intertwined with the railway to be sold. Pengelly’s letter warns: ‘I know personally about two local stations, Romiley and New Mills Central, within which sit Network rail “commercial” properties, and wonder what benefit will accrue from divorcing these properties from the stations they are embedded in. Let’s hope the new owners at least paint them the same colour as the rest of the station’.
The question is, can Network Rail really be sure that this deal, which in any case as I pointed out before, is not good value for money, will not harm the future of the railway – especially given that it is not clear what properties are being sold?
Another respondent to my article in Rail 849 is a guy with 20 years experience of working on the security aspect of the railway. He is convinced that Network Rail and, in particular, the train operators are wasting millions of pounds annually on buying and maintaining these systems.
First he told me about the inadequacy of Network Rail’s maintenance of CCTV cameras at stations. The work is routinely contracted out but the oversight of the work is poor as Network Rail has insufficient expertise in what has become a key aspect for the railway given the heightened levels of concern over security. Moreover, when cameras fail, they are often replaced with new equipment of a similar standard when it is clear that an upgrade, which may not be much more expensive, would provide far better images.
New systems now can be introduced without a local recorder but instead can operate as networks. The recorders are expensive and need maintenance, but, he says, they are still being widely installed at great expense. Indeed, whereas a standard recorder ought to cost around £1,500, under contracts train operators often pay three times that and he has seen cases where contractors are charging £12,000.
The cost soars because of the use of contractors and subcontractors. One job in which he was involved at Manchester Victoria ultimately cost £160,000 whereas originally it was estimated at £260,000 because he insisted that the work would be supervised by Northern, rather than by Network Rail and a series of subcontractors. ‘The railway’, he told me, ‘is seen as cash rich and an easy target for overpricing. We can’t keep on allowing that’.
The extra costs largely a result from the fragmentation of the railway. In a rational world, he says, Network Rail would have be a central purchasing point for all this equipment, which is pretty standard, and then sell it on to the train operators. This would not only guarantee all the equipment was all compatible but also would mean there was a rational approach to its installation. Network Rail should have the skills and the ability to be the principal contractor, which would then ensure that costs are reasonable. Instead the industry is ‘at the mercy of the techies who can pull the wool over the eyes of those responsible for purchasing equipment’.