Amid all the hoo-ha of HS2, integrated rail plans and Great British Railways, there’s a rather more serious situation brewing behind the scenes. In the week beginning November 15, all the train operating company bosses received a letter from the Department for Transport which set out their budget for next year.
This is the inevitable result of the spending review announced earlier by the Chancellor Rishi Sunak. It is confirmation of what has been brewing ever since the start of the pandemic and the collapse in passenger numbers. The bare numbers are stark. Overall, last year the industry received just under £13bn in govt support, to keep services going during the crisis – that meant an extra £8bn on the £4.9bn that the industry had expected to receive. It was quick action by the Department for Transport which effectively obtained a blank cheque from the Treasury, on the basis that keeping services going was essential for key workers in the NHS and elsewhere.
The industry and, indeed, the Treasury, has muddled through this year but for the financial year starting in April next year, the outlook is as bleak as a wet winter’s morning in Oldham. Not only
Is government support for the industry supposed to go back to the normal, but the aim is to cut the support further to around £4.5 bn per year. And worse, over the next three years, the industry’s costs are supposed to be cut by £2bn, that’s around a further £700m annually.
That is the news which the train operators received and, not surprisingly, met with incredulity. Now, of course, this is largely theoretical because there is no possible sanction against the operators for failing to meet these targets except losing the contract which may be a blessed release. Nevertheless, they will be under close scrutiny from the Department which, in turn, is being forced into this by the Treasury.
It is impossible to exaggerate the extent of this crisis which so far has had little coverage in the media apart from a thorough article in The Guardian on December 6. There is no doubt that cuts will make things worse and become self-fulfilling, in the same way that they were in the bad days of BR which pared back services to ensure no one could use a service which it wanted to cut.
The pressure is relentless and will only be made worse if the Omnicron virus spreads rapidly. The latest figures –pre-omnicron – for the end of November were not reassuring. Rail use has dropped to around 62 per cent of the pre-Covid figures which car mileage is around 90 per cent and for goods vehicle the figure is consistently above 100 per cent.
Cutting back on branch lines which would be the most sensible response if the aim were to maintain numbers of rail users is all but impossible given the ‘Reversing Beeching’ and ‘levelling up’ agendas. Instead, the target will be early and late trains, as well as frequencies, on well-used lines, despite the fact that this will be a great disincentive for rail travel. As I have learnt anecdotally from several people, they will not use rail if frequencies are reduced as the service becomes too inflexible.
As ever, there is no clear strategy from the Department, not least because the transport secretary, Grant Shapps, has very little interest in the railways. His passion is general aviation and indeed his officials have become exasperated about his lack of focus not just on the railways but even on commercial aviation. He is only interested in ensuring that little local airports do not get turned over to housing so that he can keep flying his plane there. Add in the massive changes that will result from the creation of Great British Railways, but which have been put on hold because the legislation has not been prepared, the railway is finding itself leaderless and rudderless at a time of its greatest crisis since the series of accidents following privatisation.
Not surprisingly, this crisis is being compounded by a recruitment crisis. Many senior experienced managers are leaving the industry precisely because of that uncertainty and the fact that the new train operating system will be neither fish nor foul: it will have some vague commercial incentives that will be insufficient to change behaviours, and yet will not be sufficiently embedded in a public sector culture of service.
The overall figure for rail usage disguises a far more complex pattern. While leisure travel, especially at weekends, is on some days almost back to pre-Covid levels, commuting remains well below 50 per cent – commuting outside London is hovering around 45 per cent but lower around 33 per cent in London. First class travel on long distance has slumped and barely reaching 10 per cent of past levels on many routes. Nothing points to the failure of the Treasury to understand the rail industry than its insistence on the proposed 3.8 per cent fares rise in March. Leisure passengers are far more price sensitive than commuters and business travellers, and therefore the price increase is likely to have a detrimental effect on passenger numbers, quite possibly wiping out any extra revenue from the rise. Try, though, explaining that to the economic illiterates who inhabit the Treasury in Whitehall and, as I have said before, do not understand the concept of elasticity.
This is part of the tin ear response by the government to the attempts by Department for Transport officials to explain the economics of the industry. The Department for Transport claim that the letters to the train operators were merely part of the overall management process to ensure that taxpayers’ money is used efficiently. This is patent nonsense. The industry and its managers are under unprecedented pressure to make real and severe cuts to services, and as usual the Treasury pays regard only to savings rather than revenue generation. This is going to be a long term battle over the future of the railway and the industry leaders must speak out against these cuts.
The answer is not always ‘HS2’
Not surprisingly, I have received more hate tweets and personal abuse on Twitter and other social media than ever before because in my previous column and in The Guardian I expressed the view that the change to the HS2 plan was not yet another of Boris Johnson’s crimes. It is to Nigel Harris’s credit that as an editor, he allows me to express a view which in some quarters has been viewed as welcome as dog diarrhea in the living room. I am sure the letters page in this issue will be full of ‘sack [or possibly shoot] Wolmar’ advice.
Yet, privately – and in some cases even in public forums – I have received widespread support for the notion that the Integrated Rail Plan represents a more coherent approach to rail investment than the previous fixation with the particular version of HS2 that was developed a decade ago. One senior industry source accepted, as I did, that the Integrated Rail Plan was flawed but stressed: ‘there are the bones of many of the right answers in the IRP and they look eminently more doable and affordable than the other mad Tory concoctions’. There have been numerous similar responses.
In particular, there was a detailed and considered response from The Rail Reform, a group of railway engineers and managers, which praised many aspects of the plan, pointing out that actually it contained a new electrified line between Liverpool and Manchester ‘which the IRP should have majored on’. It concluded that despite the pandemic and the resulting loss of patronage, ‘Despite this, the Government is still prepared to invest £96bn in rail infrastructure for the North and Midlands. This is a massive vote of confidence in both rail and the economies of the North and Midlands. That should be a cause for celebration, not cries of “betrayal”, which for the most part seem to be politically motivated.’
The IRP was poorly presented and sold, but in time to come, I am sure it will be seen as an important development and, crucially, as a far more coherent approach to new railway investment than the emphasis on HS2 provides. Meanwhile, I will dodge the bullets.
By the way, the useless Mystic Wolmar decided that the situation at the beginning of 2021 was too difficult for him to get out his crystal ball. This will be remedied with a new set of predictions for 2022 in the next issue – but any suggestions will be considered, so do please send them in by email.