Rail 734: The mystery of the silent Rail Delivery Group

Remember Iain Duncan Smith’s most memorable speech, at the 2002 Conservative party conference  when he said ‘the quiet man is here to stay, and he’s turning up the volume’. He lasted barely a year after that as his lack of public profile and charisma proved fatal. Well, the rail industry has its own version of the ‘quiet man’, the Rail Delivery Group, whose public profile is non-existent which has led senior industry players to question whether it is viable in its current form.

The concerns about the RDG’s role in the industry were highlighted recently in a memorandum sent out by Network Rail to its members following David Higgins’ recent appearance at the Transport Select Committee. In public, at the committee, Mr Higgins praised the RDG saying it had come up with 11 recommendations in the franchising review conducted by Richard Brown following the West Coast fiasco last year. In private, Network Rail’s attitude to the RDG is rather different. A memo sent out by Network Rail admitted there were concerns that the Rail Delivery Group was a ‘powerless talking shop’ and which might be seen by the public as a ‘cartel for key players and a conspiracy against the taxpayer’. While at the committee Higgins said that the RDG’s contribution to the review by Brown ‘was the first time that the industry has spoken with a single voice’ (albeit one that was not heard by the wider public), in private the memo said that this was the ‘first step towards working more effectively for the common good in an industry structure set up for conflict’ (my itals). In other words, the RDG has failed previously to address the inherent conflicts within the industry. Higgins, though, tellingly said that the RDG’s contribution was the result of a private consultation between the RDG, Brown and the Department which begs the question as to why the RDG did not come out in public with what it sought from the review. Instead, all it said in a press release was that it supported its findings.

The origins of the Rail Delivery Group were in the McNulty report published in the Spring of 2011 which examined the railways’ finances and considered ways of saving money. McNulty recognised that the fragmentation of the industry was the cause of much of the extra cost and recommended the establishment of ‘a Rail Delivery Group, consisting of the most senior people from Network Rail and the TOC-owning groups, freight and other stakeholders’ Its remit was ‘to lead a substantial programme of change – focused particularly on cost reduction, changing the industry culture, encouraging more integrated whole-system approaches where necessary, and improving the speed and effectiveness of cross-industry bodies. Mechanisms for establishing a dialogue at industry level with the trade unions should also be explored’.

Well those laudable aims do not seem to have been achieved. The RDG’s sparse website seems to suggest an organisation that is not interested in public communication or debate, which is clearly necessary for breaking through the barriers inherent in the industry structure. The minutes of meetings read like redacted versions and the most recent press release is dated April 18 and told the world that ‘Rail Delivery Group emphasises the importance of an efficient railway’ which is rather like  Wall’s announcing that its ice cream is best eaten cold. The RDG has set up a number of committees to discuss ways of saving money but little has emerged from them. And certainly no relationship has been establshed with the trade unions.

Moreover, as the memo suggests, there are concerns that the RDG which has a membership of just 12 – Network Rail, and passenger and freight operators –  is only involving a small number of ‘stakeholders’ and shunning the wider industry. Consequently, in April, the RDG invited applications for ‘associate membership’ status but talking to a couple of managers of organisations which responded to this invitation, they have had absolutely no communication from RDG subsequently. Hence Network Rail’s concern about a ‘cartel’.

Ministers seem to have recognised that the RDG is not fulfilling its original mandate. Far from leading the debate on how to reduce costs in the industry, it has become a very limited talking shop with no staff and no recognition. Its chairman, Tim O’Toole, has a rather bigger fish to fry, as he is chief executive of FirstGroup which is struggling with a huge debt burden and fighting to retain its key franchises. Now the organisation’s sole employee, Graham Smith, has left to pursue other interests even though, having worked there since its inception and for the McNulty report before that, he was appointed its ‘Director-General in February this year. Clearly the organisation is in trouble and under attack from within the industry and it has now decided to enter into a co-operative arrangement with the Association of Train Operating Companies in order to boost its activity. According to my sources, ATOC will supply facilities and staff to enable RDG to extend its activities.

However, this is unlikely to be welcomed in the wider industry. Associating itself too closely with just one section of the industry, the operators, seems to be compounding the problem. In an ideal world, the RDG would be the genesis of a re-integrated railway but clearly that is against government policy, and that is why we end up with this impotent organisation in search of a role and a structure.

Regular readers, of course, will know my views on railway structure and the need for an integrated industry. Interestingly, even in Europe this has begun to be recognised. In what is termed the ‘fourth package’ of rules governing railways across the European Union, there had been a proposal to force governments to break up their railways in order to separate infrastructure from operations in order to boost competition. Currently, this is only necessary for accounting purposes, but the idea was to have totally separate ownership.

Now, again according to my sources, this is not going ahead. France and Germany – or rather SNCF and Deutsche Bahn – objected and wanted to have an integrated structure. Indeed, in both countries, both operations and infrastructure remain state owned though interestingly despite this, in Germany around 30 per cent of services are contracted out which shows that integration and competition are not incompatible. However, now it seems that the EU is going to abandon the requirement in the fourth package for compete separation and, in fact, in France, there are moves to reintegrate SNCF with the infrastructure organisation, RFF. Meanwhile, in the UK, we are tinkering about with universal franchising and a dysfunctional structure all because of supposed European rules and an obsession with competition. The French and Germans have shown precisely how to stand up to daft EU legislation and that is what we should be doing. Instead of the RDG, we should have a more integrated structure. Indeed, as this column showed when I wrote about the experiment with the alliance on South West Trains (Rail 730), perhaps the very idea of the RDG, being a top down organisation, is wrong.


Fares review gets half way there


If anyone was expecting that the fares review would solve the vast array of problems surrounding ticket prices on trains, they will have been sorely disappointed by its recommendations. They would, too, have been in cloud cuckoo land as it was never going to happen.

The fares structure has become far too complex and unwieldy because it is an amalgam of various regimes, some stretching back to British Rail days, and given the number of stakeholders involved in the privatised industry sorting it out is simply impossible. However, that does not mean the review was a waste of time. Quite the opposite. Passenger groups have welcomed several aspects of its findings even if, on the most fundamental issue they have lost out. That is the hope of ending the inflation plus 1 per cent formula which has governed fares increases for the past decade. There was no mention of changing that regime and while Labour has made supportive noises about fares, it has not committed itself to ending the rises either.

However, there were several good aspects to the review. The two trials – on part time season tickets which will include smart ticketing and on single fares on long distance journeys being half the cost of a return fare rather than merely £1 cheaper – have both been widely welcomed. Indeed, unstated in the review is the very fact that off peak fares will remain regulated, a victory for long term campaigning on the issue by Passenger Focus.

The other partial victory was over flex, the flexibility given to operators to impose rises of up to 5 per cent more than the regulated rise, on specific routes. This has now been reduced to just 2 per cent which, though still resisted by passenger groups, will stop the very high rises which have angered particular groups. As Anthony Smith, head of Passenger Focus put it, ‘flex allowed the train operating companies to distribute government subsidy as they could choose which passengers got the highest rises. That did not seem right’.

Watch out for more battles over fares, however. Patrick McLoughlin, the secretary of state for transport, does deserve a special prize for chutzpah when he said, during the announcement, that the government had kept rises to 1 per cent above inflation rather than 3 per cent when, in fact, it was his department and no one else who had suggested the 3 per cent rises in the first place! Those politicians…..


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