Rail 902: The trains must be kept running – even empty

We have found out what living in a sci-fi dystopia is like. Fortunately, the basic services such as water and electricity are still functioning and the food supply chain is in good order, despite the attempts of a small selfish minority to disrupt it by panic buying and hoarding. Social order has not been disrupted and by and large people are responding to the injunctions not to travel.

Indeed, I have not taken a train since February and am unlikely to do so until July if I am being optimistic. And nor is anyone else with passenger numbers down 70 per cent or much more. I have heard of trains from Doncaster to London with just three on board, and other intercity services with barely more. That said, the trains must keep running at whatever cost as a total shutdown of the rail network risks creating irreversible outcomes.

As predicted in my previous column – and frankly this was not a stunning coup for old Mystic – the Department for Transport has taken over the revenue and cost risk for all the franchises. This means effectively that the operations have been nationalised. This was not only inevitable, given the collapse in rail usage but also desirable. Because this was done reasonably early, many jobs have been saved. It is not only those that are directly employed by the train operating companies that have been effect, but people in the huge supply that ensures the railways can function, ranging from catering and retailers at stations, to maintenance staff such as painters and cleaners. In total around 300,000 people are employed and while some will inevitably be laid off, making them eligible for the 80 per cent wage subsidy from the government, the fact that Grant Shapps, the Transport Secretary, moved quickly prevented any operators from throwing in the towel and therefore causing more difficulties.

Oddly, the precise arrangements have not been published but because of the ridiculous ‘commercial confidentiality’ rules – frankly commercial is the last thing the railways are at the moment! – I understand that the train companies receive a 1.5 per cent management fee with the possibility of earning a bonus of 0.5 per cent as long as they provide good information and keep the trains clean. This is hardly going to excite any shareholders or, frankly, on the other hand make any Corbynistas (remember them?) foam at the mouth. Note that in order to keep the system going, and not making too much use of the operator of last resort, two of the direct awards, Great Western and Southeastern, that were coming up for renewal have been extended but of course under very different arrangements as they are now management contracts.

Of course this small percentage of not very much is going to get even smaller. At the time of writing, services are running at around 50 per cent normal but this is probably more than needed. While there may be a few trains with reasonable loadings at rush hour, such as early services into Waterloo which are heavily used by medical staff for adjoining St Thomas Hospital, most are running with very few occupants. The risk, though, is that cutting back too much will lead to crowding, which has happened to some extent on the Underground. This led to an unseemly public row between government ministers, notably Matt Hancock, the Health Secretary and London mayor Sadiq Khan over accusations that he had cut back services too sharply but, in fact, he had no choice given high sickness rates and increasing numbers required to self-isolate.

Transport for London already takes all the revenue risk across both the Underground and the Overground, with the arrangement for the latter being a management contract rather than a franchise. This will now be the new norm. Although Shapps said that he was suspending the contracts only for a period of six months, they are now as defunct as Brunel’s broad gauge. There is no way that any of the figures in those contracts in relation to subsidies and premium payments will have any relevance when this crisis is over.

There are two reasons for that. First, there will be no precise date at which this crisis will end. Sure, we may at some point no longer be asked not to make unnecessary journeys, but there may well be some element of deterrence to prevent an immediate rush onto the trains. All the attractions which bring people onto the railways, which range from art galleries and theatres to pubs and restaurants will not all suddenly reopen on the same day. The return to normality will be slow and protracted, which means a simple return to the old contracts would be too onerous for the operators.

Second, and this is an issue to which I will return in future columns over the next couple of months, it may well be that we will be going back to a different world. We used to have BC and AD, and we now may well now have BCV and ACV. It is inevitable that with millions now set up to work at home, and finding that it is not as difficult as they thought, work patterns are likely to change. For some this may mean just spending Fridays out of the office, but for others it may be much more profound. They may, for example, decide to spend the first couple of hours of the day at home, and then take a much cheaper train into work. The railway in recent years has been almost totally focussed on working out ways to accommodate the growth that has been almost continuous for the past quarter of a century. I had a long conversation with Mark Hopwood, the very experienced rail manager who has recently been given responsibility for turning around the poor-performing South Western Railway and while he remained optimistic that ‘people will still want to travel by train’ he accepted that ‘there may well be a long term impact on the railway’.

Therefore government control is inevitable and desirable. It will be up to the government to make decisions over the level of train services likely to be needed and, crucially, over future investment schemes. Leaving the debate about HS2 aside for the moment, the railway may be able to take a longer term view of what investments are needed. Of course, ultimately this will be best passed on to a revived version of British Railways that is separate from the Department of Transport but this is hardly the time to do that. The Williams Review may have had answers on how best to do that, but the world has changed irrevocably since it was written.

With the operations under the control of the Department for Transport, and Network Rail already on the government’s books, the money paid between them for access charges is rather immaterial though there will have to be some major accounting mash up in the future. Huge numbers will fly about but as the old adage goes, if you owe someone £5,000 you are in trouble, if you owe £5m let alone £500million quid, then they have the problem.

The only part of the railway still in private hands is the rolling stock. The rolling stock companies have a cast iron guarantee that come hell or high water, they still get their charges. Even if half the fleet is parked up in sidings, the Roscos are still entitled to all their payments. In effect Roscos are finance organisations who borrow money to buy trains which they then lease out, and therefore it is not easy for them to declare a rental holiday. However, my understanding is that at least one of them is looking at ways at relieving some of the burden on train operators. Unfortunately, there seems no way out of continuing to pay for the trains bought through the hugely complex Private Finance Initiative deal such as the Hitachi Inter Express Programme. Well done the Department for Transport and ministers for creating that contract – we did try to warn you that complexity is not a way of passing on risk to the private sector.

The key decision – and this whole column has been building up to this – is that the show must go on, and that can only be decreed by the government. There is pressure from the Treasury to stop the trains altogether. Why run trains if no one is using them, they are asking? In fact, this would be disastrous both for the future of the railways, and more important for the country as a whole. In terms of the railways, stopping trains altogether would not save much money since the government has guaranteed 80 per cent of wages to companies forced to end operations. Worse, modern trains do not like sitting unused for long periods. It is bad for both their software and hardware as was shown with the problems with the Siemens Class 700s on Thameslink last August.

Worse, though, is the message it would send out. The very fact that people see trains running as usual is a sign of normality. If the whole network fell silent, it would be seen as a lack of the Blitz spirit. The old Windmill Theatre adage of ‘the show must go on’ rightly struck a nerve with the public and the industry must resist any shortsighted attempts by the Treasury to clear the tracks.

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