Rail 481: Planning: a policy that dare not speak its name at SRA

The railways’ fear of central planning distorting market forces is to blame for the National Audit Office’s trenchant criticism of the SRA on rolling stock policy, contends Christian Wolmar.

There has always been something of a paradox over the word ‘strategic’ in the title of the Strategic Rail Authority. Strategic implies planning, taking a long view and determining priorities. But in its directions and guidance, the SRA has a specific remit to encourage private involvement in the industry and that means open up the rail industry to free market forces, which are unpredictable and do not necessarily fit in with the organisation’s policies.

Trying to find the right levers to set the framework of the industry without putting off private investors is probably the central task of the SRA. It is not easy and this is highlighted by the highly critical report of the National Audit Office on rolling stock. Indeed, purchase of trains is one of the few ways in which the industry has managed to attract considerable amounts of private investment and therefore it is not surprising that the SRA is a bit nervous about upsetting the private sector applecart.

However, according to the NAO, it certainly does not seem to have got the balance right. Indeed, given that the tone of these reports is always tempered by the fact that any organisation subject to criticism is shown a draft before publication, the SRA comes in for one hell of a pasting.

The NAO highlights the fact that the SRA was given a clear strategic role in respect of rolling stock but suggests that it has not managed to carry out that task effectively. For example, nearly all the train operators complain that the SRA failed to share good practice or lessons learned on the introduction of new trains: ‘during our study, we did not identify any evidence of the SRA exploiting its strategic position in the industry to identify and disseminate best practice in the introduction of new trains’. The SRA pointed to two examples, C2C and South East where it had helped to improve the industry’s understanding of the contractual problems, but clearly the NAO was not convinced that the organisation was doing enough in this respect.

The report picks out the fact that most of the new train orders – 12 out of 15 – have been late. But despite the promises by the TOCs when signing franchise agreements to introduce trains by a set date, the SRA has failed to impose any sanctions on the TOCs concerned except in two cases. This, the SRA argues, is because it is unclear whether the TOC has been in breach of its franchise agreement. Rather interestingly, under the early agreements drawn up by the old OPRAF, the SRA’s predecessor, strict obligations to deliver on time were imposed on the operators, but now the requirement is couched in vague terms such as ensuring they make ‘reasonable’ or ‘best’ endeavours to introduce them. Not surprisingly, the SRA now says that these may not be enforceable in the courts, which begs the question as to why they bother including these terms in the first place.

The NAO, therefore, recommends that the SRA should place ‘robust obligations’ on operators to bring in new trains on time, but this shows that the NAO itself does not understand the financial strain the industry is under. Such obligations would cost a lot of money as there is considerable risk, not within the operators’ control and therefore the financially-strapped SRA is not in a position to carry out this recommendation.

The overall thrust of the NAO’s report is that the SRA should take a much more direct role in intervening in decisions over rolling stock acquisition. It says the SRA should ‘assess the need for any further new passenger trains in the light of the likely future demand for passenger services, the age of trains on the network and likely changes in the train manufacturing base’. Indeed, in a rational world, the SRA would do an inventory of the existing rolling stock and work out when and where it is likely to need replacement. Then it would draw up a strategy which would include cascading of stock between various operators.

But that is old centralist thinking which does not accord with today’s fashion. So, the rolling stock strategy published at the end of last year precisely eschews such planning and is pretty dismissive about the whole notion of cascading. While the SRA concedes that a number of respondents to its consultation paper were in favour of such a, euh, strategy, it rejected the idea because of three ‘downsides’ To do so, it argues, would raise ‘matters of market sensitivity and commercial confidentiality’ and could ‘compromise the SRA’s negotiating position’. Moreover, a published plan would become dated unless kept under review. And finally, it ‘could unduly influence individual companies’ about ‘future rolling stock allocation and investment’.

Frankly, most of these objections are just plain nonsense. Is the industry being run in the interests of a few narrow ‘commercial interests’ or is it about bettering the lot of passengers? Most things become dated unless kept under review, a task not beyond the wit of a 500-strong organisation. And, yes, the decisions would influence companies’ decisions about rolling stock investment, that’s the whole point. The operators are transient beasts who come and go, leaving behind the stock they lease. They are not able to make long term decisions without the SRA’s say-so anyway, so why not just publish a clear strategy.

On cascading, the SRA is even more out of touch with realities. It gives four good reasons why cascading should take place: avoiding the need for new investment; lower costs; improved performance by allocating vehicles to suitable routes; and ensuring the oldest stock is pensioned off.

However, cascades have disadvantages, according to the SRA, such as possible adverse ‘competition law consequences’ – again, who is the railway been run for? – and the costs of driver training and the like. Again, such objections hardly hold water when set against the advantages of a coherent strategy on cascading.

Logic, therefore, would dictate that the SRA takes a strategic decision and allocates rolling stock to franchises. After all, as the NAO points out, most rolling stock is heavily subsidised by the tax payer so that would ensure that our money is well spent. But no – those market forces would be distorted because TOCs would be deprived of choice of rolling stock which could drive up franchise costs. But hold on a minute, no rolling stock deal can be signed without the SRA’s permission anyway. Moreover, according to the strategy document, even cascades would be unlikely to proceed without SRA permission. So the SRA does determine what rolling stock can be used anyway.

The writing of the NAO report unfortunately coincided with the publication of the rolling stock strategy and therefore it is unable to analyse its effects. But there is a clear difference between the thinking of the two bodies. The NAO, as an outside agency with little experience of the railways, is simply aghast at the way that normal logic is not applied to the way the rail industry is run, because of a terror that rational planning will effect those all powerful market forces. This, I contend, is all the result of a fashion which will eventually change and the logic of the need for central control in the industry will ultimately prevail. In the meantime, the railways suffer.

A new trick from Thames

Having travelled on the railways all my life, it is rare to have a totally new experience. Like most regular users, I have been delayed for hours, been on trains that look as if they had not been cleaned since Victoria ruled the waves and even turned up for non-existent last services. But Thames has gone a step further by providing me with a totally new experience, the wrong kind of platform.

A few weeks ago, the trains out of Paddington were in a total state of chaos because a Network Rail contractor had cut through signalling cables with a pile driver. I reached Didcot an hour late for my meeting, but it was on the return journey that Thames excelled any of its predecessors. My companion and I felt we were very fortunate when we returned to Didcot station just in time to board what was advertised as the 12 56 to Reading, Slough and London Paddington.

We got to Reading without mishap but obviously there was a delay since the train sat there without moving. Oddly, several people came on to the train and asked if this was the Oxford service. No, we said confidently, we have just come from that direction.

However, a pleasant young woman who, earlier we had told that this was not the Oxford train, took the trouble to tell us that we were mistaken. As we rushed out of the train, we saw that there was, too, a big clue that the train was not heading any further up the line: it was parked in a bay platform. Now, hard-hearted readers may suggest that an experienced traveller like me should, perhaps, have gone to investigate once all these Oxford bound travellers had begun trying to board the train. But surely, today’s customer-focussed train operators could not simply reverse a train without any warning or any announcement about where the train was going. Could they? Perhaps we should be grateful that the franchise is transferring from Go-Via to First in April.

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