Rail 472: Rail must combat crisis to deprive enemies of ammo

Despite the publication of the SRA’s upbeat case for rail document, Christian Wolmar warns that the railways remain in crisis – which must be tackled if political vultures gathering over the industry are to be scared away

‘You are not making enough of the fact that the railways are in a complete state of crisis’ said the middle-mannered and thoughtful senior source in the industry over a pleasant but alcohol free Italian meal. Now, as a journalist I am used to being berated for sensationalising my reporting but to be berated for not playing up a story sufficiently is a journalistic first in a 30 year career.

In a way, it is easy to be seduced into thinking that despite the difficulties of the past three years since the Hatfield crash, steady progress is being made and that the industry is over the worst. Performance is inching up and the railways are booming again, with numbers of passengers now exceeding pre-Hatfield levels and apparently set to grow more. The document put out by the SRA, everyone’s railway the wider case for rail (why is lower case so fashionable but commas out of favour?) is seeking to capitalise on this by setting out a robust defence of the importance of the railways in the life of the nation.

However, the depth of the difficulties of the railways is demonstrated by both the timing of the publication and the fact that the SRA thought it necessary to state that case publicly. The document is designed to feed into next year’s Treasury review of the government’s spending programme but it is not a good time to state the case for rail given that the current state of uncertainty within the industry. The railways, as Alistair Darling, the transport secretary, made plain at the launch of the everyone’s railway, have yet to prove that they offer value for money.

Indeed, the very publication of the document exacerbates the sense of concern. It is not a vision of better things to come but a defence of what we have already and a plea, on bended knees, for the government not to allow the railways to slip into a financial crisis which will result in cuts in services or even lines. Sure it makes a cogent case about the importance of the railways to Britain’s economy, but should that not be axiomatic?

Well no given the current state of the industry. The most immediate problem facing the railways is not so much money – even though there is a gaping hole in the kitty and that underlines the other difficulties – but the state of instability which creates uncertainty and, incidentally, exacerbates the financial situation. The Railway Forum has taken a snapshot of consultations and reviews being carried out by the principal railway organisations. It is too long to reproduce here but edited highlights show the fundamental reassessment currently taking place as Mark 1 of privatisation is replaced by Mark 2:

First, there is the interim review due out soon which will determine how much money Network Rail is allowed to spend; secondly, the Network Utilisation Strategy for each route, the first due in November, will outline how many trains can run on each line; third, the SRA’s Specification of Network Outputs, published earlier this month though possibly the subject of a legal challenge from the freight companies, defines what condition the infrastructure needs to be in on each route; then, there is the establishment and settling down of both the Rail Accident Investigation Branch and the Railway Safety and Standards Board as well as the forthcoming replacement of the Rail Regulator by a committee; finally, the refranchising process is well underway and there is much more.

Add, too, the fact that Network Rail is still finding its feet as well as taking back some of the maintenance contracts in-house, which it has discovered is a difficult and complex process; and that the Department for Transport increasingly anxious about whether it will see any progress by the time of the next election is making suggestions for improving the management of the railway by, for example, the appointment of a chief operating officer for Network Rail.

A key point is that most this list is about inputs, dealing with matters internal to the industry, even, as it happens, where the definition, such the Network Output Specification, suggests otherwise. The only ones directly affecting passengers is the refranchising programme and therefore they will see little immediate benefit from all this behind the scenes work. Effectively the industry is re-engineering itself at a time when there is both increased demand as well as financial pressure to cut back on costs. If privatisation had been carried out properly and thoughtfully, setting out the aims and capacity of the industry would have been undertaken at the outset, before BR was killed off. Indeed, it would have informed the way the industry was broken up. Now, instead, the industry is being retrofitted with the tools required to operate properly and, just as with engineering retrofits, it is an expensive and disruptive process.

And a confusing one. It is not clear whether all this work is being coordinated. Take, for example, the West Coast Main Line modernisation programme. Tom Winsor, the regulator, says it would save a £1bn if work north of Crewe were deferred. Yet, currently, the West Coast franchise is costing the SRA over £300m in subsidy annually and the CrossCountry one, which makes a lot of use of that route, a further £217m under the current management contract arrangement. In part, those payments are a hidden compensation payment to Virgin because it does not, as its contract with Railtrack had specified, have the use of a shiny new 140MPH track all the way up to Scotland. Now to defer the programme of creating even 125MPH track north of Crewe for a couple of years may save on the maintenance budget but will it not just result in the SRA having to cough up more money on both Virgin franchises for longer. According to the SRA figures, by 2006/7, Virgin is supposed to pay the SRA a £146m premium payment – Pendolinos will fly before that happens.

Which brings us neatly on to money. There are, indeed, twin financial crises. Network Rail faces having to make some cuts in addition to the remarkable £10bn the company has cut from its five year spending programme following the initial announcement of its business plan early this year. To cut its planned spending from £34.5bn announced in March to £24.6bn now without too much fight with the regulator seems to suggest that Network Rail has no idea of what money it needs.

The other financial problem, the money available for franchises, is probably more pressing as it cannot be disguised so easily. The franchises are getting £1.5bn this year but industry insiders reckon that the long term figure will be closer to £2bn, over half a billion more than set out in the Ten Year Plan.

Will the government cough up extra money for both NR and franchises in response to Bowker’s pleas? The answer is there will be he usual fudge given that politically ministers cannot afford screaming headlines about major rail cuts in the run up to an election. However, the Department’s road budget is apparently being underspent so there may be a bit extra to be found for rail. Network Rail may be allowed to extend its borrowing – although interest is going to become a major item in the future – and the government will get through the election. And then, if costs are not under control and the railways do not appear to be delivering value for money, things will get really dodgy.

Another destabilising influence on the railways is that rail is attracting a host of enemies who, are gathering as a hostile army outside the vulnerable walls of the SRA. For example, John Redwood, the ex Welsh Secretary famous for failing to learn the country’s anthem, but still a force on the Conservative Right took a heavy swipe recently in an article in The Times suggesting that no more money should be invested in the industry and that the network should be cut back to just a few commuter and InterCity lines as recommended by the Serpell report in the 1980s.

BAA, the airport owner, has also recently got in on the act by attacking the Stop Stansted Expansion campaign with a press release arguing that investment in the railways was a waste of money. It said: ‘Britain’s railways are in a chronic state needing billions of pounds just to bring them up to scratch, let along modernised to compete against the convenience of air travel.’

More importantly, an extraordinary anti-rail tirade by Kim Howells, the transport minister, was quoted in The Times recently. At a Fabian Society meeting, in response to a rail enthusiast who said more money should be spent on the railways, he said: ‘I disagree with possibly everything you have said. This is precisely the trainspotter mentality coming through here. We spend much more in public funds on railways than we do on roads.’ Echoing Redwood, he even added that he felt cars were greener than trains.

This is serious stuff. The outspoken minister seems to be testing the depth of public support for the railways. If he can get away with those words, can he get away with the deeds? Bowker and co must not bury their heads in the sand and fall into the same trap as ex Prime Minister Jim Callaghan, who famously was (mis)quoted as saying ‘Crisis, what crisis?’ There is a crisis and they have to address it, so that Howells and his fellow ministers do not have the ammunition to cut back on the railway.

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