Rail 397: Gerald jumped before he was pushed back into the abyss

The reasons given by Gerald Corbett for his departure from Railtrack were accurate – but they weren’t the only ones. Just back from India – where the British model of privatisation is unlikely to be followed – CHRISTIAN WOLMAR believes the Chief Executive’s resignation had been on the cards for some time, and offers some advice to his successor.

Whenever politicians resign citing the fact that they want to spend more time with their family, one never quite believes them. And so it is with Gerald Corbett.

Of course, the reasons he gave publicly for leaving were true. He was indeed sick of having to carry the can for the failings of an industry whose problems long predated his arrival as Chief Executive of Railtrack three years ago. He took on the job under the misapprehension that Railtrack was a company like any old widget-maker or parsnip retailer and that the boss could lead a quiet life as long as the shareholders were kept happy. Not so.

Even before Ladbroke Grove, Mr Corbett had begun to realise that the company was very much more than a conventional FTSE-100 conglomerate like Grand Met where he had been Finance Director. Being Chief Executive of Railtrack involved satisfying politicians, a highly critical media, the Regulator and, of course, passengers. After Ladbroke Grove, Mr Corbett was never out of the public eye and after Hatfield he felt he could not even go out to play golf lest some intrusive tabloid photographer captured him enjoying himself while rail passengers suffered delays.

Privately, Mr Corbett was tired of having to face the music on his own. The complete absence of Sir Philip Beck, the anonymous and taciturn Chairman of Railtrack, from the fray in the year was, quite simply, disgraceful. What on earth was the man paid his salary for? Sure, he was a non-executive, but a chairman is still supposed to be a leader. Now, to cap it all, he says he is leaving in the summer, presumably to spend even more time with his roses.

So, yes, the reasons Mr Corbett gave for his departure are accurate. But they were not the only ones. After all, if the board had really been intent on keeping him, it would have made sure he stayed at least until the present difficulties were over. The speed with which a permanent replacement has been found suggests there had been some machinating going on. You can picture the scenario. The operational difficulties of the railway seemed to be never-ending and the bad publicity would just not go away. The share price was dropping again and it was tempting for them to think that a clean break would be better.

Moreover, John Prescott’s undisguised loathing for Mr Corbett was beginning to become public knowledge and, given the highly political nature of events in the railways in the lead-up to the election, this also made a change seem a desirable option.

The board, too, will have started getting rather chary of Mr Corbett’s musings on the future of the rail industry, notably his famous ‘think the unthinkable’ remarks. Basically, most of the board – and indeed, Government ministers – wish that the whole debate about the future of the railways would go away and Railtrack could return to quiet obscurity.

So as Mr Corbett stood over the precipice ready to jump, he must have been aware that far from being thrown a safety rope, he would probably be pushed back into the abyss.

There is no doubt, too, that Mr Corbett contributed to his own demise. As I suggested in this column in the last issue, Railtrack’s senior management cannot be absolved of responsibility for what has happened. As head bwana, Mr Corbett was responsible for a structure that was clearly not robust. Moreover, there is no doubt that Railtrack’s safety-first approach to the gauge corner cracking issue, which has caused the worst-ever crisis in the railways, would not have happened under BR, whose engineers would have had the self-confidence to restrict the number of speed limits to places where the risk was high. Indeed, it is probable that BR’s engineers would never have allowed full-speed trains to continue using the Hatfield curve.

In addition, Mr Corbett had begun to look slightly ridiculous when he started to blame the wrong sort of trains for the gauge corner cracking, and this rather sloppy remark triggered a series of press releases from various parts of the industry slagging each other off which made everyone look very foolish. (Memo to rail industry press officers: follow my old teacher’s guidance of turning your tongue round 20 times in your mouth before uttering insults.)

Despite Mr Corbett’s mistakes, his departure is bad news for the industry, made even worse by the fact that his replacement is the company’s former Finance Director. I have never met Steven Marshall, the new Chief Executive, and I wish him well, but the message sent from the board by appointing him and an even less experienced new Chief Operating Officer – Jonson Cox – is that railway experience is not relevant. This suggests that the message Sir Philip is trying to send out to the City is that “we have your best interests at heart” and the one which passengers can take is “we don’t give a damn about you”. This demonstrates all that is wrong with the structure of the industry, an issue I have often covered in this column and will do so again shortly when the dust is settled.

The board should have realised that the problem with Railtrack was not a financial one, but an engineering one, and that is where the company’s weakness seems to lie. So here are six free suggestions for the new Chief Executive:

  • Concentrate on your core activity, which is the boring task of maintaining and renewing the railway, not selling property or even new ventures such as the Channel Tunnel Rail Link and the West Coast Main Line, which should be hived off to a separate subsidiary.
  • Be aware that Railtrack cannot behave as a conventional profit maximising company.
  • Be prepared to ignore the advice of your replacement as Financial Director.
  • Hone up your political and communication skills to ensure you can deal with politicians and come across well on the media.
  • Remember that while the passengers are not your customers, at the end of the day their satisfaction level will have an important bearing on the success of your company.
  • Appoint more people with railway experience and more engineers to the board.

Oh, and pray for a bit of luck and for a couple of years without a railway disaster.

British example will not be followed

While all this drama was happening, I was in India visiting the Darjeeling Himalayan Railway and met several senior railway officials at various functions. Privatisation is, of course, being discussed and indeed there is a high-level committee due to report on the possible directions that the world’s largest railway system – 40,000 route miles and 1.6 million employees – could take.

But one thing is certain – the British model will not be one of them. So far, Indian Railways remains an old-fashioned state monopoly, though one or two privately marketed trains aimed at tourists now run on its tracks. The report, due to come out in the spring, is likely to recommend that as a first step Indian Railways should be separated from the government as, at the moment, it is actually part of the Ministry of Railways and its employees are civil servants.

Then, it is likely that some of the functions of the company could be privatised. One official told me that the first candidate would be to sell off the coach and locomotive manufacturing divisions, so that the expertise of a multinational could be used to drive down costs. Next, and more contentious, would be the maintenance workshops which employ a staggering 200,000 people. This would be controversial as some of them are sited on very valuable city-centre land in Bombay (where land prices are the same as those in London) and Calcutta. The trade unions are very strong and are likely to resist such moves.

But when it comes to selling-off the core activity of the railway – running trains – the senior officials all reckoned it would be a long time before the government was prepared to embark on such a controversial path.

In many respects this is a shame because Indian Railways shows all the problems of state control. Its fares are determined by the government which rarely dares to put them up because of public protest. And while numbers of staff are being reduced by 2% a year, the government is not really able to tackle the underlying problems of the awful bureaucracy – buying a ticket can take hours – and the other inefficiencies. Take one example: virtually all passenger trains are full. There is plenty of capacity on the railways but increasing the number of trains is impossible because passengers are effectively subsidised by 30%-40%.

Yet fares cannot be raised because the government is fearful of protests such as those in Bombay when rises were abandoned after the city was brought to a halt by demonstrators. Moreover, the railway performs a vital social function by providing cheap travel. The answer is obviously more efficiency and perhaps modest rises. Possibly fares could be taken out of government control and handed to an independent Fares Commission but even this is likely to stimulate mass protests.

But in the meantime, the trains remain overcrowded and a vital resource – in a country with roads that limit average speeds to 25-30mph even between major cities – is underused. Just as in the UK, there are no easy solutions and the danger is that eventually the system will be so vulnerable to financial or structural collapse because of government inertia, that a mad radical privatisation plan will be adopted. The fear is that eventually India’s roads will be improved and then the railways will not be in a position to compete.

While India may be a completely different country, the issues for the railway to tackle are in many respects the same – relations with government, competition with the car, privatisation and investment.

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