Rail 951: LNER success shows the way forward; and a note on Transport’s eminence grise

For many years, the train operating companies have complained about excessive interference from the Department for Treasury – ooops, sorry, I meant the Department for Transport. They certainly have a case. The increasingly onerous rules imposed by Whitehall on the train operators left them very little leeway to use their skills and knowledge to improve the railway, and contributed to the collapse of the franchising model.

However, as I have long argued, this was very much the nature of the beast. The owning groups were in it for the money and their decisions were based on making a profit, not necessarily on improving the lot of passengers. Occasionally these two aims coincided but often they did not.

Covid, of course, changed all that when the swift action by the Department for Transport transformed the rules of the game overnight and franchising was essentially dead in the water. However, what has happened subsequently in the varies performance of the railway is very interesting and points the way forward for the future when Great British Railways takes over the reins of the industry.

Looking at the latest figures from the Office of Road and Rail on how passenger numbers are recovering post pandemic, there is a striking contrast between the two main lines between London and Scotland in the data which covers the three months up to the end of September 2021 – in other words before the Omicron variant hit. On the West Coast, Avanti had reached 57.5 per cent of pre-Covid usage while LNER on the East Coast could boast a quite remarkable 90 per cent in the same period.

That is a whopping difference. Now, in mitigation, there are some specific characteristics of the East Coast which has a somewhat less business-oriented and older demographic. There is more leisure and ‘one off’ travel than on the West Coast. Also, it serves only two smaller English cities, Leeds and Newcastle, in contrast to the West Coast which encompasses three major conurbations. It is therefore noticeable that the two East Coast open access scored better than Avanti at 74 and 70 per cent respectively but not as well as LNER. So why the discrepancy? What has LNER done to get its customers back?

In a word, LNER has had the freedom to operate without an overbearing Department or, indeed, an owning group constantly second-guessing what it should do. The East Coast route was taken over – for the third time in the history of franchising – by the Department’s operator of last resort in June 2018 when Virgin East Coast threw in the towel. The publicly controlled LNER has now been granted an extension which means that it will run the service until 2025, by which time presumably the new structure of the industry will have been sorted out (Are you sure? – ed).

Talking to LNER insiders, it is clear they are ahead of the game because they are able to look at the business as a long term proposition, well beyond the current length of the contract. That’s because, ironically, even though the managers are effectively employed by the Department for Transport, they have the same kind of commercial freedom that was enjoyed by the British Rail sector managers in the 1980s (read my forthcoming book, to be published in June, on British Rail for details!). Essentially they were able to look at both revenue and costs, and make decisions accordingly.

LNER is in the same position. As one insider put it, ‘if we think there is a case for investing in card readers at stations, we can do that whereas if there had been an owning group, we would have struggled to get permission to invest if we could not show that it would pay for itself within a couple of years.’ Indeed, it is that time constraint which has done so much to limit what franchisees could do and by an odd quirk, the contracts in the public sector – which now includes Northern and SouthEastern – have more freedom to be run as businesses than those that have remained in the private sector. There is no target of subsidy or premium payment, which has allowed more freedom to make commercial decisions and issues with staff can be resolve more easily – including minor ones such as ensuring there was no bureaucracy when platform staff needed better clothing in the cold winter months. As my source said, ‘in the past this would have required a whole lot of form filling and decisions from on high, whereas we just okayed it straight away’.

There has been innovation, too. For example, the compulsory booking system, which has attracted considerable criticism and has now been changed to strongly advised to book was an amazing source of data for the company, providing much detailed information about people’s travel patterns. This in  turn enabled a much quicker refund service to be introduced. Another move has been to allow passengers to book more than the normal twelve weeks in advance. This restriction is determined by the requirement on Network Rail to give 12 weeks’ notice of any timetable changes required for engineering works. However, it prevents people wanting to book further in advance but now LNER is opening bookings at least 6 months in advance with the proviso that timings might need to be changed – in that case either a full refund or alternative arrangements are offered. Given that such timetable alterations are a relatively rare event, then one could ask why no one has thought of this before?

There have other marketing initiatives too, such as the ‘Lincoln Experience’ train run in conjunction with the local tourist board and even a present wrapping service which apparently was very successful. This was precisely the sort of innovation that Chris Green, one of the cohort of brilliant BR managers which emerged from its graduate training scheme, introduced successively on Scotrail and Network SouthEast and, after privatisation on Virgin West Coast.

The lesson for the future arrangements under Great British Railways is all too obvious. The train operators should be allowed full commercial freedom, enabling them to take initiatives which encourage passengers onto the railway. The problem is that the current government’s obsession with private operators means that it will be impossible to give these companies the freedom that is needed. That is because, like the fable of the scorpion and the frog, private operators are constrained by the demands of their shareholders and required to show instant results for any decisions. They may try to behave differently but in the end they are like the scorpion, unable to control themselves. That was, ultimately, why franchising was already failing before Covid and why the system was never fit for purpose. Railways need a long term perspective and the risk with the new structure is that the same old mistakes will be repeated most crucially, because as I have always argued, railways need to be integrated and operated as one unit, with no separation between track and train. All the signs are that ministers have not understood this message and never will while they are constrained by an ideology that has been shown not to work.

Andrew Gilligan, the eminence grise of transport

Talking to industry sources, it is remarkable the extent to which the show is not being run by the Department for Transport, nor even by the Treasury but by Andrew Gilligan, Boris Johnson’s transport adviser in No 10. With Grant Shapps demonstrating that characteristic of Johnson’s Cabinet ministers in being utterly uninterested in the details of his brief, Gilligan is able to wield considerable power on transport policy. Gilligan was, remember, the journalist at the centre of the ‘sexed up’ Iraq threat report row which led to the setting up of the Hutton enquiry and subsequently worked with the then London mayor Johnson in City Hall as his cycling tsar has been in Number 10 ever since Johnson became PM in the summer of 2019 and is a workaholic with an ability to hone down on every detail of a particular policy. When he was in City Hall, I remember him nitpicking over the slightest detail of cycling paths and preventing schemes going through unless he was satisfied.

He is doing the same sort of thing in Number 10. Investment schemes being put forward by local councils and the various stakeholders have to pass his desk and he is wont to spend very long Zoom calls questioning those putting forward schemes on the precise timing of freight trains or of the exact acceleration capability of new rolling stock. One official told me: ‘He knows his stuff, and sometimes he has had a far better grasp of detail than the civil servants in the Department for Transport. But he does have his particular hobby horses.’

Indeed, when it comes to transport, Gilligan is essentially Johnson’s Green conscience, emphasising the need for sustainable and cost-effective solutions. While he is no friend of HS2, many in the industry accept that he is largely on their side, if somewhat obsessive and eccentric. Therefore, while people like me will rejoice at the departure of Johnson – not incidentally because of his politics but because of his total unsuitablility for the role of Prime Minister – Gilligan is very likely to be ousted with him and that would be a loss for the railways as, despite all his eccentricities and obsessions, he is on the right side of history.

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