Rail 908: The future is vertical…and the slavery myth

Let’s look to the future for once, given that the present is so bleak. I will desist from pointing out, once again, the madness of the ‘don’t use the railways’ policy, except to mention it in the shorter piece accompanying this one.

There is no doubt that out of the chaos, a new structure for the railways will be needed. Once the present ‘emergency measures agreements’ run out in September, there will be an interim period during which some kind of new arrangement will be cobbled together. The thinking on this is so far vague but it is likely that there will be an incentive for the train companies to boost passenger numbers, perhaps like the contracts on the London Overground where the operators receives a bonus when passenger numbers go up. However, the targets are likely to be set very low given that the usage of the railways will perhaps, optimistically, have reached 30 per cent of pre-Covid levels but the Department is insistent that the train operating companies need incentives, however small or easy to obtain, in order to ensure that they perform efficiently.

I have always thought that this is mere ideological claptrap, a keystone of right wing ideology with its belief that people will only behave with their own interests in mind. Within this set of values, there is the unchallengeable view that the public sector will never provide a good service because there is no such incentive. My view is that the level of service is determined by the quality of management and by good choice of staff, but is deemed unrealistic and old-fashioned by those who insist that even top managers need to be paid a bonus to do their job properly.

There is, though, nevertheless a problem with the present arrangement of management contracts handed to the existing private companies for a 1.5 per cent mark up boosted by 0.5 per cent incentive which I am told is very easy to obtain. This is the worst of all worlds because private companies which have no interest in keeping costs down are running the trains. This clearly needs to be changed, but how?

A group of experienced railway professionals, the Rail Reform Group, have come together  to try to work out a way forward out of the twin crises of the collapse of the existing rail franchising model together with the collapse in rail usage in the pandemic. The key suggestion in the paper (which is available at https://railreformgroup.org.uk/ ) Elephant on the Line: time for vertical integration is, as the title suggests, a return to the structure that most railways across the world have operated through for most of history: a vertically integrated railway.

As regular readers of this column will know, I have always argued that the only sensible way to run a railway is through vertical integration. Railways are essentially one business, the provision of transport services in coaches or wagons that are limited in where they can go by the infrastructure. The idea of separating out train from track has always been, to put it in plain language, daft, dreamt up by the ideologues of the Treasury who hated the British Rail monopoly and taken on by the European Union in order to break up the admittedly inefficient railways of Eastern Europe. It was never a good way to run a railway.

As the author of the paper, David Prescott, a long established railway manager, argues, the key aim in the new structure must be efficiency. As I have argued since the outbreak of the pandemic and the sabotage – as Michael Holden put it – of rail’s market, the hound dogs of the Treasury are going to be out to attack the railways given that the subsidy to keep the going will be double or more previous levels. The counter, therefore, has to be to make them more efficient. That will mean an emphasis on new technology even though, as we know, this rarely leads to massive savings, on flexibility such as a simpler ticketing system and on cutting costs. At the moment, there is no incentive to do so under the existing structure.

An integrated railway is more efficient because it is so much simpler to operate. Chuck out all those bureaucrats in the Office of Road & Rail – my target for closure anyway – who spend millions on trying ensure there is scope for competition in the railways. Remember those dozens of lawyers who spent weeks in courtrooms to try to work out who should have paths on the East Coast Main Line. Or the ridiculous situation we had when franchises were let on the basis of timetables that Network Rail could not actually deliver.  Oh yes, a few open access operators will be forced out of business. I actually quite like Hull Trains and Grand Central but the hidden cost of enabling them to operate is simply not worth the trouble.

Prescott puts it well: ‘There is now no single guiding mind at any level in the industry.  In its place is a mass of bureaucratic process across the industry, including funders, to regulate the contracts and interfaces.  The linkages between costs and benefits, which are so fundamental to the operation of an efficient industry, have been completely lost and with it all natural pressures on cost control.’ I rather liken it to London when the Greater London Council was abolished in 1986 which the left the capital without a ’guiding mind’ for 14 years. It is only since the return of the mayoral system that London has benefitted from megaprojects like Crossrail and policies like boosting bus and rail services, and implementing the congestion charge. The railways need a coherent strategy that can only be delivered by a single united organisation.

Prescott points out that the Department for Transport has not been totally opposed to vertical integration as such a model has been sanctioned for the redevelopment of the Valley Lines around Cardiff, and, surprisingly, for the new East West route that will eventually link Cambridge and Oxford. He recognises that possibly different models may be required for suburban and long distance routes, and even, unlike me, suggests that open access operators might be accommodated. Freight operators, who are wary of vertical integration, would, he says be guaranteed a right to operate over most infrastructure. While i support increased freight and recognise the concerns of my friend, the veteran (sorry Tony) freight advocate Lord Berkeley, there is no reason why there should not be some kind of small regulatory office – much, much smaller than the present ORR – to ensure that their needs are accommodated.

This is a chance in a generation to sort out the railways. The structure that has endured and creaked ever since I travelled on that first 05 10 Stagecoach train on February 4 1996 from Twickenham to Waterloo with its army of ticket inspectors early on Sunday morning can now be laid to rest. It is not, to use one of those ghastly business expressions, ‘fit for purpose’ and now never can be given that no private sector organisation is going to take revenue risk for years to come, if ever. It was always ‘pretend capitalism’, a game played between the Department for Transport and a bunch of bus companies who could see the potential of a fast buck. No longer. Management contracts are all very well but do not really add any value to the railway and one has to ask why the private companies are being paid 2 per cent to do not very much.

Therefore, as Prescott says,the options are clear:

‘Tinker around the edges with an inherently cumbersome, bureaucratic, unresponsive, expensive and non-customer orientated railway industry

 

OR

 

Move to a much better defined, locally integrated, customer focussed, cost-effective and value orientated group of railway operations.’

Unfortunately with the ideologues in government and the hawks overseeing the process in the Treasury, I do not feel optimistic. But one can but hope.

 

 

Jumping on the slavery bandwagon

 

The way that issues snowball in this all too connected age is remarkable. I am, of course, delighted that Black Lives Matter is getting heard and it is tragic that it took the online murder of an innocent for it to be so. There is much to be done in the rail industry about diversity, especially the paucity of BAME managers in relation to the number of staff.

However, it is too easy to get carried away by the iniquities of the past and I was rather shocked to see sometime Rail contributor Gareth Dennis jump on the bandwagon with so much alacrity. On June 18 he tweeted ‘Back in 1833, the UK government abolished slavery and decided to compensate former slave owners’ and then went on to argue ‘the greater part of the compensation money that stayed in the UK was invested in railways, meaning that the railway network that grew up in the 1830s and 1840s was largely paid for off the back of slave ownership’.

I’m not sure why this is relevant in any case, but there is no evidence to back up this statement. First, of course, the railways predated this payout. The Stockton & Darlington, completed in 1825, was funded by Quakers most of whom, according to The Origins of Railway Enterprise by Maurice Kirby were ‘small farmers, shopkeepers and crafsmen’. The Liverpool & Manchester, funded by local industrialists who, incidentally also contributed to railways in the South such as the London & Southampton, opened in 1830.

In The Grand Experiment, the Birth of the Railway Age, Stuart Hylton writes: ‘The voracious demand for investment in the railway made it necessary to trawl a rather wider market [than rich people who funded the canals]…the railway boom of 1836 led to the establishment of Stock Exchanges in Manchester and Liverpool ….and mania of the mid 1840s to many other towns and cities such as Leeds, Glasgow and Edinburgh.’ There were, literally, thousands of investors in the railway mania, which is the period to which Dennis refers, and while of course a few may have used some of this compensation money, to argue that this investment in the railway network largely came ‘off the back of slave ownership’ is patent nonsense.

Dennis has quoted his source as an article by Ian Steadman in Wired but there is nothing to back up his claim that much of this compensation money was invested in the railways. Steadman, indeed cites a couple of rich former slave owners like William Gladsstone’s father John who did support the railways but then quotes a source as saying ‘We think probably 10 to 15 percent of the wealthiest elites were connected to the slavery business’ – in other words, the rest were not and in any case, as mentioned above, there were thousands of other investors.

Of course, much of the legacy of the Victorians was built on awful exploitation of workers paid barely subsistence wages and treated in intolerable conditions. But to focus on the railways, as Dennis has done, without any clear evidence of this supposed legacy and without any obvious  reason why this industry should be singled out is virtue signalling of the worst kind. These myths need to be nipped in the bud before they become conventional wisdom.