Rail 422: Dear Richard, welcome to your job, but no compromises

In an open letter to Richard Bowker, CHRISTIAN WOLMAR urges the new Chairman of the Strategic Rail Authority to redraw the structure of the railway with the creation of a handful of regional integrated companies that would be new players in the industry.

Dear Richard…

Congratulations on being installed as the Chairman of the Strategic Rail Authority, a job that currently ranks in difficulty with doing the PR for Rose West or selling TVs to the Taliban. Well, perhaps not quite as bad but it will be rather like conducting an orchestra when you have lost your baton, most of the players are looking elsewhere and your arms are being manipulated by a big puppetmaster called Gordon.

Here are a few tips for you to cut out and keep. First, ditch the bonus scheme which supposedly could boost your £250,000 salary by £50,000 annually. There are no quick wins in the railway and the media will immediately latch on to any bonus payments which you are paid, contrasting them with some terrible recent experience of passengers being delayed or, even worse, killed in an accident. I know you were probably getting more at Virgin, but most of us can cope on a quarter of a million a year, so ditch it now. You will get brownie points for a long time.

This brings us on to an important wider point. This is a very public job. And rightly so. Media is a big part of the job and you must use it. Your predecessor, Sir Alastair Morton, had a slight tendency to – how should I put it delicately? – ‘grandstand’. He loved the catchy expressions – remember “the railway had a nervous breakdown” post Hatfield and, over the years, my fax machine has been almost burnt out by having to churn out his regular speeches. But when he appeared on radio, he tried to show how clever he was rather than communicate. Learn from that mistake.

So hone up on your media skills. Appear on telly whenever asked as long as you have something to say and know how to express it. Become Mr Railway in the public’s eyes and remember they won’t have the foggiest idea what the job really means, so you can use your position to put across pro-rail ideas and thoughts. Bat for the railways, Richard.

Here are another couple of Alastairisms that you should avoid: don’t think aloud in public without having worked through the ideas; and most important don’t fall out with, or slag off, the Treasury or Whitehall in general. They will always be able to get back at you.

But of strategy from Alastair, there was none. As I have joked before, the SRA should have been called R because it had no strategy and no authority. So your first task is to ensure it has both, which brings us to the really meaty part. This is a dream job for someone with a vision. It is no exaggeration to say that you have the opportunity to shape the future of the railways for a generation.

Therefore, do not compromise. Sure, there will be some short-term pain. Everyone is whinging about there being a hiatus and delays to investment plans. No matter. Getting the structure of the railways right for the long term is the most important task facing you and everyone in the industry. So what if some bit of improvement is delayed for a few months if, after Railtrack comes out of administration, we get a coherent structure for the railways which will allow cheaper enhancements, better services and regain the public’s trust?

My view, as expressed here before, is that since we are in any case in the midst of a revolution, we may as well go the whole hog and completely recast the whole industry. No shilly-shallying about with trying to tinker around with the edges and expecting NuTrak, just by the removal of its shareholders, to bring about a total transformation in the railways.

Integration is the only solution, and that should be your watchword. Of course, that means a complete reshaping of the structure. I won’t bother going at length through the reasons but let me just set out a couple. In the foreword to Andrew Murray’s Off the Rails (Verso, £14.99), John Hendy, the leading counsel for the bereaved and injured at the Ladbroke Grove and Southall inquiries, argues that the contractual model for the railways is inherently unsuitable: “A single organisation, the railway, cannot be satisfactorily run exclusively by legal contractual relations. Tightly specified contracts are incapable of creating co-operative commitment to safety: no contract can ever eliminate the space for parties not to pursue its terms wholeheartedly.”

Coming from a lawyer, that is damning stuff. It does not just apply to safety but to the whole panoply of incentives and compensation regimes, which is what did for Railtrack because of what it had to pay out post-Hatfield and the way they pushed up costs on the West Coast Main Line refurbishment.

Without integration you will continue to get a conflict between Railtrack and the operators which will always push the price up of any work carried out on the railway, and make it impossible to have a sensible trade-off between short-term disruption and long-term benefits. In any case, as you know from your days at Virgin, the whole complex matrix of incentives and fines is largely an expensive nonsense. The railway coped without it for 170 years and could do so again.

This is also important for one of the least-discussed of the various crises facing the railway – staffing. You must do everything in your power to foster the type of public service ethos which kept BR going despite all the pressures it was under. That requires integration to generate the type of spirit which will attract good managers and staff to the railways. People need to work for an entity which has a purpose – running a service – rather than for a mean-minded section of the industry whose only purpose is to maximise its own profits.

Under BR, operating managers attempted to do everything they could to minimise delays and keep the railway running. They did not need the threat of fines or the possible loss of the franchise in order to do so. Their job was to operate the railway and they took a pride in that task, often going well beyond their immediate responsibility.

Actually, what I am suggesting here is that you do yourself out of a large chunk of your job. One of the reasons the Railtrack experiment did not work is because franchising failed, too. Your predecessor expected the franchisees to be the engine of investment but that was always fanciful. Sure, Virgin has spent a lot of money on leasing new trains, but the real investment has come from the rolling stock companies which take the risk. Franchisees have no assets and therefore no balance sheet on which to raise funds.

The integrated companies I am suggesting will. They will not merely be slightly expanded operators but must be a new type of player, backed by substantial funds. Of the present franchisees, I reckon only Virgin, Sea Containers and possibly NEG have the vision to try their hand at running these real rail companies. Now how you get from 25 operators, Railtrack, and a host of maintenance contractors to, say, four or five regional integrated rail companies is your problem. But it is an exciting one.

All this simplification will have a useful side-effect. The costs of regulation in the industry are crazy. The Office of the Rail Regulator spends £14m a year and the SRA probably £35m. I say ‘probably’ because nowhere is that figure in your annual report and your press office had some difficulty digging it up. The HSE adds yet more to that burden. This is excessive for an industry with a turnover of under £4bn. A simplified structure will help you focus on your core role of fostering investment in the rail industry.

One area where you must increase staffing, however, is on major projects. The SRA should play a central role in drawing these up and not, as was tried before, leaving it to the train operators. As an aside, frankly I think the Special Purpose Vehicle idea put forward by your predecessor and adopted by Government is a non-runner and that the only solution is for the new integrated companies to be responsible for enhancements.

And while on the subject of the HSE, make sure you have a good relationship with its senior staff. They are imposing massive cost burdens on the industry and you must work closely with them to try to ensure this is reined back as much as possible.

Your first big task will be to publish the strategic plan. If Sir Alastair’s effort is anything like the strategic agenda, ditch it. The plan sets out your framework and it is too important to rush out. Sure, there will be criticism if you delay it yet again, but you can blame Alastair and the current fluid state of the railways. Your plan must be strong on detail and must be melded in with the Government’s ten-year transport plan. It must include a clearly set-out economic model of the industry, including both current and capital accounts. And there must be no more lists of every project dreamed up by gricers in the past decade. While on the subject of plans, take the ideas of Central Railway seriously. It is offering at no cost to the taxpayer a scheme that would, if it worked, take millions of lorry journeys off the road and transform Britain’s railfreight industry. Worth proper consideration.

Here’s another little pitfall. Do not use the setting up of studies as an excuse for inaction. It is beyond me why, any time more information is needed, a year is wasted in undertaking a study when a couple of journalists could produce something equally authoritative in a matter of days or weeks.

I hope these suggestions are of use to you and I wish you luck in your endeavours. Let me leave you with my motto: “Achieve the achievable and the unachievable may happen.” You never know. And keep on wearing those blue shirts without ties. If we see you in a suit with some Tie Rack effort round your neck, we will know that you’ll have lost the singlemindness that got you the job in the first place.

Yours, Christian.

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