Rail 777: SWT alliance ‘reshaping’ is really a divorce

The latest press release from Network Rail reads like something produced by the Ministry of Information in George Orwell’s 1984 which, by happy coincidence, has just opened as a play in the West End. The release opens breezily with the statement that ‘the ground breaking South West Trains – Network Rail alliance is being reshaped’. ‘Reshaped’ is certainly the kind of doublespeak which was the way Orwell’s Ministry communicated with the people but in plain English the truth is that the alliance is over – long live the alliance.

The alliance was to have been the future, a test bed for a new way of running the railway. It brought together the two disparate parts of the railway, operations and infrastructure, in the way that had been the traditional way of running railways across the world as an integrated operation under the control of one managing director, Stagecoach’s Tim Shoveller. He is one of the best of the railway’s young managers and both sides, Network Rail and Stagecoach, wanted him in place.

The idea was that he would be in charge of a joint team. The management would be melded so that Network Rail managers would at times be responsible for SWT staff, and vice versa. Irritating disputes over compensation would be done away with and the focus would be on working together to drive down costs and improve performance.

However, it never quite worked out. There was a good relationship between the two sides and it became possible to, for example, negotiate away a late train that was delaying trackwork from starting. Shoveller told me in an interview a year ago how SWT was more accommodating about allowing access for Network Rail on to the tracks. However, neither of the two main aims were achieved. Performance stubbornly remained the same or improved only very slightly, after an initial drop. The continued increase in passengers on the network was blamed but it did seem strange that all the goodwill in the creation of a reintegrated railway did not result in reducing delays. Worse, however, costs were not coming down. I remember Shoveller, slightly embarrassed, explaining to me that really the focus of the alliance was not initially on reducing costs but more on performance.

Now, however, if not quite a divorce, there is to be a mutual and amicable separation. The Orwellian press release reveals that ‘going forward [please never use that expression especially in writing] the Network Rail post of Route Managing Director will be reintroduced..’ In other words, the joint system of management has ended and the alliance is, well, dead.

It is not only that for the most part the Alliance failed in its objectives – despite some achievements in practicalities – but there were structural reasons for its demise which have implications for any attempt to revive the idea. It is no coincidence that the break up of the Alliance has happened soon after Network Rail became part of the government. While this did not have much practical effect, it meant that a private company was in a joint venture with a publicly owned organisation, and that inevitably caused problems given that Stagecoach’s primary duty is to its shareholders, and Network Rail has none.

The death of the Alliance is a set back to the many people in the industry who had long argued that it was the way forward for dealing with fragmentation, and would be replicated across the network, even on routes where there were several operators. Many leading industry figures recognise privately that the fragmentation of the industry is a major driver of excessive costs and that working together co-operatively was the main way forward.

It is not to be. Moreover, this comes at a terrible time for Network Rail and that too was a contributing factor. The monitoring report published on June 12 by the Office of Road and Rail (still ORR fortunately) makes awful reading and while one cannot quite characterise Network Rail as a failing organisation, it is coming close to that. There is certainly a likelihood that part of the reason for the collapse of the Alliance is that Stagecoach had tired of being intimately involved with an organisation that is underperforming in all respects.

The monitoring report is certainly unequivocal. In the old days, these reports were rather kindly and supportive of the organisation’s failings. Under Richard Price, the ORR has sharper teeth and certainly it needs them. On virtually every metric, Network Rail is failing to meet targets or aims.

The most striking is perhaps the lack of progress on enhancements. At the end of March, after one year of the new Control Period 5, the five year programme for investment, Network Rail had fallen behind on 30 of its 84 planned enhancement milestones – that is more than a third. Imagine if this was a school or a hospital not meeting that proportion of targets – the outcry would be deafening.

The whole organisation is getting less efficient – by 2.2 per cent in that first year on operations, maintenance and renewals – and consequently the expectation is that it will only become 16 per cent more efficient by the end of the Control Period in March 2019, rather than 22 per cent. For efficiency, read money – proposed savings that have been targeted will not be achieved and therefore Network Rail will have to cut back on its programmes. Indeed, in that first year, Network Rail overspent by £230m and when the final figures are in, it is expected that the extra spending will amount to £430m against its target for that year – in an organisation with a turnover of £6.5bn, that is very significant and if there were any shareholders, they would be up in arms.

Ever since I started writing about Railtrack nearly 20 years ago, there have been complaints about the lack of information that the company has about its own assets. According to ORR, this is showing some progress and improvement – as it should after so long – but there are still questions over the ‘data that Network Rail uses to plan and manage works on Britain’s railways’.

So to sum up. Network Rail spends more than it should in completing less work than programmed and moreover relies on information that is unreliable – and in the process has alienated its immediate customers, the train operators.

The roots of this debacle seem to be in the early days of the previous control period (2009/14) when Network Rail cut back too many staff and cut corners in an effort to meet the target set by the ORR at the time. There is in general a lack of experienced railway staff working for the organisation, given that many of the old BR hands who did have a far more extensive knowledge of the industry than today’s recruits, have retired. However, my view is that it is more than that. The fragmentation of the industry, a fundamental mistake, makes it difficult to ensure that Network Rail is accountable to the train operators. One way of possibly remedying this which is being considered by the ORR is that instead of much of the money for Network Rail being handed over direct to the company, it should be paid to the train operators who would then have a real role in ensuring Network Rail’s work was up to scratch. Technically this happens at the moment but there is no impact on the operators’ finances as the amount is predetermined. So under the new system, if Network Rail had performed so badly that it ought to be fine, instead it would receive less money from the operator, incentivising it to improve performance. As with all such attempts to reformulate relationships in the industry, however, it would be complex to work out the precise new arrangements.

The biggest risk arising from this failure is that the government will lose faith in the industry’s ability to deliver projects. It was noticeable that the biggest cuts in George Osborne’s post election financial statement were to defence and transport. If that continues – and with health, education and overseas development protected that is inevitable – the time when enhancements and new projects will be hit may not be far off. Network Rail needs to get its act together rather than trying to convince us in Orwellian press releases that black is white.



Transport subsidies go to the better off


While the railways have benefitted from all party support in recent years and that has been translated into financial backing, they have been reluctant to an argument that the subsidy supports the mainly well-off who use them.

This is highlighted in a report from the Equality Trust, Taken for a ride (note to authors: please think up something more original!) which argues that the richest ten per cent receive £980m million in transport subsidy annually compared with just £300 million for the poorest ten per cent. While some of much of this is hidden subsidy for motor transport and for aviation,, the report says that the richest 20 per cent take three times the number of train trips those those on the lowest incomes, with an average of 61 journeys per year compared with around 20. The pattern is reflected, too, in the distance travelled by train, with the richest

fifth travelling almost four times as far as those on low incomes.

This is, of course, a reflection of the fact that a high proportion of train travel is commuting into London or business trips on intercity services. Nevertheless, it is a weak underbelly of justification for rail subsidies, and it is one the industry needs to address with innovative cheap fares for the less-well off and ensuring that new projects are focussed on areas that help economic regeneration.

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