Rail 453: Another brick dislodged from privatisation’s wobbly edifice

No matter how much ministers and Network Rail try to play it down, the decision to take back the Reading area infrastructure contract inhouse is another irreversible step towards the unravelling of the privatised railway, contends CHRISTIAN WOLMAR.

We have reached yet another seminal moment in the history of the rail industry. Network Rail and the Government may wish to play down the decision to take the Reading area contract back in-house from Amey but it represents a further momentous step in the untangling of the privatised railway.

This column has argued several times recently that the railways are in a state of flux and that it is hard to predict, pace Mystic Wolmar, what the shape and structure will be by the time of the next general election in 2005/06 and this decision proves the point.

John Armitt, NR’s Chief Executive, argues the taking back of the contract is a way of providing the company with a benchmark against which it can compare costs on other parts of the railways, and it will enable NR to learn more about the reasons the cost of maintaining the railway has doubled since privatisation. Pressed on BBC Radio 4’s World at One on the day of the announcement, he admitted if the contract proved successful, others may follow and eventually many more might go back in-house but he attempted to stick to the line that the main purpose was to allow NR to be a more ‘intelligent’ client.

In fact, the inescapable logic is more and more contracts will be taken back. For a start, the private companies are likely to fare badly when having to bid against an in-house team which does not have shareholders to recompense. Moreover, inside information will become crucial, just as external franchise bidders have an uphill task against incumbents.

The whole Compulsory Competitive Tendering process for local councils, introduced by Mrs Thatcher in the 1980s, foundered on the failure of the outside bidders to win contracts. Remember, too, that when OPRAF – the old Office for Passenger Rail Franchising – first sought bidders for its franchises in 1996/97, British Rail was precluded from bidding by that wily old bird Roger Salmon, the first Franchising Director, even though that had been a concession won in the House of Lords during the passage of the Bill.

His explanation was to have allowed BR to bid would have deterred many of the private companies from entering the contest since they were likely to put in higher bids even if, ultimately, he argued, they might cost less because of private sector efficiency (stop giggling in the back of the class, there).

Therefore, outside bidders will be more and more difficult to find. Of course, they will be doing much of the work as before. It is inconceivable that NR will recreate the whole of the BR Civil Engineering Department, and therefore some work will still be done on a contracting basis, but for individual jobs rather than on the discredited system of area-wide contracts created at privatisation.

The logic is that NR must now become a bidder for all contracts. This first one will be by far the most difficult to organise. Once it has an in-house, team, it will be much easier to take more of the 22,000 staff back. If the first contract proves successful in reducing costs, the momentum will be unstoppable.

The second – but entirely unspoken – reason for the decision is the growing recognition that the fundamental safety problems created by the contractual regime have not been resolved. The two incidents just before Christmas, at Aldwarke Junction and South Ealing, both caused by what appear to be very basic maintenance failures, were widely seen within the industry as incredibly lucky escapes.

The third, and most compelling reason why this is an irreversible step is that there is a fundamental logic to NR carrying out most of the work itself. When NR was created, its chairman, Ian McAllister, a lifelong Ford man, was surprised that the work had been contracted out in the first place and could not understand why this structure had been created. After all, the maintenance and renewal of the rail network is the company’s primary, indeed virtually its sole, task. What other company contracts out its core activity? Certainly not Ford.

By forcing Railtrack to contract out everything at privatisation, the Tory Government created a bastardised construct of a company which was little more than a bundle of poorly formulated contracts, and this undoubtedly contributed to its demise.

One of the basic conceits of those who privatised the railway – and one unfortunately shared by all too many people in New Labour – was that all the old ways of doing things were wrong. This has proved a disastrous policy for the railways and gradually we have seen traditional methods being re-established. This latest move by NR can be seen in that light but it will also demonstrate how difficult are the practicalities of reversing privatisation and fragmentation.

There are, of course, pitfalls. NR will have to take back 500 people, a considerable addition to its workforce. It is no surprise the unions have welcomed the move because they see this as an opportunity to regain some of the power they lost at privatisation. Indeed, this was one of the reasons why this move, which is logical in every other respect, has long been discounted. But a sensible approach in negotiations should allay this problem.

It is fortuitous – and possibly not entirely coincidental, though the contract did happen to be coming up at the right time – that it is an area controlled by Amey which is being taken back under direct control. The hapless Amey has seen its share price plummet over the past year, bringing the company to its knees, and although it is one of three partners in the Tube Lines consortium for the Jubilee, Northern and Piccadilly contract for the Tube, signed on New Year’s Eve, it has not been able to put up its share of the equity and had to be bailed out by Bechtel and Jarvis, its partners.

Given that Amey, too, was responsible for the lapse in maintenance which resulted in the broken fishplate at Ealing, the company was not in a position to defend itself in the face of NR’s move as a company in a better financial state might have done. Doing a Lee Bowyer – kicking a man when he is down – seems to be the name of the game, though I am sure this never occurred to Mr Armitt.

The decision to take back the Reading contract was made by the NR board, but it first informed the Government, which agreed to the move. Ministers will, however, be hard-pressed to make sense of their own actions since just a few days before NR’s announcement, they announced the signing of the Tube Lines contract – which privatises the infrastructure.

Eurostar must reinvent itself

When the first section of the Channel Tunnel Rail Link opens, Eurostar will have an opportunity to relaunch itself and to change its product. That is desperately needed as the model which has developed since services started in November 1994 leaves a lot to be desired.

The fundamental problem is that Eurostar has been run like an airline rather than a train service, but a pretty ropey airline at that. Take the meal service in First Class. I took a 1623 train the other day, due in at Paris three hours later. Now the days of having a big meal at tea time became unfashionable when my grandfather was still in short trousers but on Eurostar the tradition survives. By the time we reached Brixton I had been given the menu and by Orpington, we had the trays on our table. The whole meal was eaten and picked up before we got to Ashford and not surprisingly none of my party had much appetite, having finished lunch barely a couple of hours before. Then the previously very attentive staff disappeared for the 90-minute run on the French side through to Paris and it becomes impossible even to ask for a drink. I wonder where they go – do they hop off in the tunnel or go to have a party in some secret disco in the bowels of the train?

That is clearly an example of a service that is being run for those who are providing it rather than the customers. The sensible thing would be to serve the meal around 1800, still allowing 11/2 hours for people to eat and the trays to be cleared.

And here’s another example of basic service failure. At the Gare du Nord there is a very well-hidden business lounge, right at the end of the first-floor section. There are few signs to it and, indeed, I only just recently discovered it. Now you would think that if you have a ticket marked business premium, you would be entitled to the free orange juice, croissants and newspapers provided.

Not so. When I was in the lounge on a recent Saturday morning, a man who had just bought a business ticket was refused entry. Only those who have paid the full First Class whack are allowed in. Now to those familiar with the perks of business travel, this is deeply confusing as virtually any kind of higher-fare ticket will get you into those much sought-after lounges at airports.

The man, an uptight middle aged ‘ra-ra’ – the term used by my teenage son for anyone who speaks in tones approaching a BBC accent – was so infuriated that only his public school upbringing prevented him from hitting the hapless French woman behind the desk. Now if I had been her, I might have just said, “OK if you care about it that much, tuck in” – after all, the price of a couple of croissants that would probably be thrown out at the end of the day since the lounge was almost empty would be worth it in terms of PR. Actually, what the poor bloke needed was a cuddle from his nanny but, in her absence, the croissants would have helped. Clearly there is a serious misbranding which must have caused similar incidents countless times.

Richard Brown, a career railwayman who formerly ran National Express’s rail services, took over in the autumn from David Azéma and made a good start by announcing a series of welcome fares reductions in an effort to boost numbers, which have stagnated for the past three years. However, he faces an uphill task in challenging the culture of this railway with an identity problem and he must not miss out on the opportunity offered by the opening of the first section of the CTRL.

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