Rail 774: letter to Sec of State

Dear new Secretary of State for Transport


I do not know who you are and you may not even exist yet by the time this is published, but no matter. Whoever you are you will face the same big questions over the railways, made all the more difficult that you are part of a coalition or minority government that will be even more cautious than usual to arise public anger. However, there are some big isshoos (as Tony Benn used to call them) and plenty of potential rocks on which your transport policy could founder. I have, therefore, highlighted a few places where I recommend simply ‘don’t go there’.

For a bit of alliterative fun, let’s characterise the five most important issues relating to the railways as fares, franchising, fragmentation, finance and ‘frastructure (I’m scrapping the barrel here). Fares is not too difficult because there seems to be almost universal agreement that the old formula of inflation plus is no longer politically palatable. Therefore it is highly likely that the least worst option for you is to simply align fares rises with inflation – and indeed make a bit of a song and dance about it, as if the idea had come to you first.

Do not, however, make any promises about tidying up the fares system. God knows, it needs it, but it would take an act of uncommon courage for any politician to begin to tackle the anomalies… Yes some fares are ridiculously high – and perhaps you could cap the long distance peak fares, but the train operators will demand their pennyworth, claiming they are a big money spinner – but there are also great bargains to be had and that is the problem. How do you stop the operators from milking the hapless peak travellers who need to get to their distant destination without killing off those cheap deals? Don’t go there. In fact, whisper it, but the ones who get the best deals are the commuters who are effectively subsidised because by travelling at peak times they are the ones who require the greatest investment in capacity and rolling stock. But don’t go there either – it is suicide.

One problem about not increasing fares above inflation is that the railway’s finances are supposedly dependent on these rises which are needed to pay for investment. There is little truth, in fact, in that often stated position but there is actually a larger financial problem which I will cover below.

Franchising is not so easy. Labour has promised reforms and a review of the process without quite explaining what that means, as well as promoting a public sector bidder for franchises. Frankly, mate (I am remember a Labour party member) I would give the idea of a public sector bidder a wide berth. It simply does not work, as it will either be an expensive failure – no bids will be won, but they will cost an awful lot of money – or the public sector bidder will be successful which means, by definition, it will have offered a deal that is more generous for the Treasury than its rivals – which means it will be under enormous pressure right from the start. Don’t go there.

Of course, if you are not a Labour politician, you will probably try to leave well alone, but even this poses some difficult questions. Franchising is, frankly, a bit of mess given the sticking plaster of extensions and single bidder deals – not at all the great competitive instrument it was supposed to be. Pete Wilkinson (memo – keep this man in your team at all costs!) who is in charge of the process, has done a superb job of ensuring that consumer interests are included in the agreements but there will be a lot of temptation to see them as a bit of unnecessary and expensive fluff. Not so – it is vital that franchises are seen as more consumer friendly so do not be tempted to go there.

Fragmentation is really code for Network Rail. And note, this is an immediate crisis. There is widespread concern in the rail industry about the performance of Network Rail both in terms of its ability to deliver projects and its day to day management of the network. This was highlighted in Network Rail’s own recent survey of satisfaction from its clients – who are in effect the operators even though ultimately it is of course the passengers. Overall satisfaction among train operating senior managers had dropped from 66 per cent in 2012 to just 40 per cent last year. Virtually every aspect of the organisation came under fire but there was particular anger over its ability to deliver plans (22 per cent satisfied), a pretty basic function for the infrastructure provider, learning lessons (23 per cent) and being ‘customer driven’ (26 per cent).

This is nothing short of disastrous and suggests an organisation in crisis and the new managing director for network operations, Phil Hutton, has his work cut out. There is one area where perhaps action on your part would be useful. There does seem to be a severe lack of railway expertise at the top of Network Rail and, of course, the last time this happened when Railtrack was staffed with railway tyros, we all know what happened. Perhaps a bit of a nudge towards boosting the board of Network Rail with some railway savvy people might not go amiss. Go there!

There is, too, the risk that we will get fiascos like the events at King’s Cross in the aftermath of Xmas and the ongoing saga of London Bridge where the contingency planning was simply not up to the task. If we get more events where the ladies’ breasts stick up northwards, then you, minister, may well be in the firing line – don’t be fooled that privatisation let you off the hook when it comes to responsibility for railway chaos. Perhaps, though, you should, however, commend Network Rail for its openness and honesty in releasing these statistics and use that as a quick excuse for an urgent meeting with the bosses!

One more radical solution is the reintegration of the rail industry. As nearly all experienced railway managers accept in private, the way to run a railway is as a whole. The nonsense pretence that the track and infrastructure can be separated from operations has time and again been shown to be an expensive fallacy. Now if you were to be of a really radical bent, you might start suggesting the gradual reintegration of the railway and the end of the daft franchising process. But you would need to be brave to go there.

As I mentioned above, the finances of the railway are in something of a parlous state. On the face of it, this sounds ridiculous. There is a committed investment programme of £38bn which is funded from the ‘Statement of Funds Available’ running up to 2019 – electrification posts are springing up across the UK, huge station work proceeding at Reading, New Street and various other places, and countless renewal projects being undertaken. So what’s the worry?, you may ask. Well apart from Network Rail’s ability to deliver projects on time, there is a big cash hole beginning to emerge in the accounts.

There’s two reasons. First, the franchise deals have clearly been more generous to the operators than expected because they have been sole bidders and because various passenger benefits have been ‘bought’ – everything costs money in this game, minister, remember that. Secondly, costs have soared and attempts to cut corners have proved unworkable. Network Rail is a clunky organisation with all the fleetness of foot of a quadriplegic hippopotamus whose habit of gold plating was born out of the Hatfield experience and the subsequent collapse of Railtrack – and despite various managements’ attempts to instil greater discipline, it still tends to spend money like it has access to the Royal Mint..

Then there is the biggest question facing your ministerial role – the mega projects that have been put forward by your predecessor. A couple are well in train – Crossrail and Thameslink – and if you are lucky (or unlucky enough) to stay in post for three or four years, there may be some jolly ribbon cutting. If there are delays, though….

The decisions, though, have to be made on the (sort of) three on the stocks– HS2, HS3 and Crossrail 2 – which are oddly interrelated. I have no doubt there will be pressure to cut back on HS2 and even if there isn’t, there will be very difficult decisions to make, especially on what to do at Euston. There are also (see my previous articles on this and in particular my column in Rail 771) idiotic decisions that have been made about HS2 that you could win Brownie points reversing, such as the location of the stations, the fact the line is 400 kph – a completely unnecessary expense – and the connectivity with the existing network.

On HS3, despite the sketchiness of the idea, push it forward as fast as you can. This is far more beneficial than HS2 for the north and will do much more to make it the ‘Powerhouse’ that has been promised. And bat like hell for Crossrail 2. This is more difficult because of the perceived London bias of much transport investment. However, Crossrail 2 is much more than a transport project. It opens up large swathes of North East London for development which is essential to maintain the growth of the capital which is the real powerhouse of the British economy. Moreover, it is essential as a way of providing better connectivity to Euston if that is confirmed as the terminus for HS2. So a no brainer, but watch out for opposition.

There we have it – a simple agenda to add to all the other transport concerns about airport location, roads, the impact on the environment (clean air is becoming a big issue), and devolution of transport decision making. Enjoy the job. It is, actually, a fascinating area but you must mug up quickly and get to grips with the issues – lunch?





Christian Wolmar


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