Williams Review must be more than a rewritten McNulty study
Williams Review must deliver.
The terms of reference published by the Department for Transport for the Williams Review provide little clue about any Government preference for future railway organisation, other than once again trying to restrain costs - for the benefit of passengers in the level of fares, and for the benefit of taxpayers in terms of the grant needed to sustain network capability.
In the 2011 McNulty value for money study, it was found that operating costs in Britain were 20% higher than for comparable European counterparts, with ticket prices 30% above the European average per passenger kilometre. State funding was also significantly higher than elsewhere, which resulted in a 40% efficiency gap being identified.
It was, however, acknowledged that British geography was a factor in higher costs - London is the main traffic hub, but is not in the geographic centre of the country, which has an effect on asset and staff utilisation.
It was also pointed out that at that time rail industry wages had risen by 16% more than the national average increase during the 15 years since privatisation, and that greater productivity was needed - in particular by making Driver Only Operation the default method of working.
There was a call in the study for improved industrial relations, to broker change. But that aspiration looks as far away as ever, with the refusal of staff ( backed by their trade unions) to extend the operation of trains without an on-board presence in addition to the driver.
The Rail Regulator acted on these findings and made substantial cuts to Network Rail’s Operating, Maintenance and Renewal budget, with a £ 2 billion cut in funding during Control Period 5 (2014-19). Despite NR opinion that this was undeliverable, the reduction in the budget went ahead. But it has proved impossible to implement, as throughout the five-year period tranches of funding have been restored as a deterioration in asset condition and lack of operational resilience became evident.
Other cost reductions were proposed, such as improved rolling stock procurement - it was suggested this should be standardised, along with the trains themselves. The change was made, but the National Audit Office found that costs inflated rather than reduced, as a result of a lack of expertise within the DfT that led to a 27 ½-year commitment costing £ 7.65 billion to procure Intercity Express Trains.
Another recommendation was that the newly created Rail Delivery Group (RDG) should lead change, and that a small independent team should have an implementation plan and monitor results. There is little evidence that the RDG is structured to deliver this type of activity, as it has no executive powers to bring compliance by Network Rail or the train operating companies (TOCs).
So, will the Williams Review have any material differences to the McNulty findings? My guess is that if there is a re-run of the efficiency matrices, the findings will be worse, suggesting that the real reason that it costs more to run our railways in Britain is to do with external factors that are different to comparable railways elsewhere.
The most significant of these is the growth in demand for services over two decades, which extends to the freight intermodal sector. It is inevitable that there will be more infrastructure wear and tear on a system that NR has repeatedly pointed out has suffered from years of neglect, in the replacement of structures such as bridges and the condition of embankments.
These issues remain largely out of sight of railway customers… until they are confronted with the withdrawal of services to allow infrastructure renewals and capacity upgrades, which at least are published in advance. But it is shortterm disruption that needs high levels of customer service management, and all too often this has been absent.
It is a surprise that the make-up of experts described as a challenge panel does not include anyone running a passenger or freight operating company or a rolling stock leasing company, with the exception of the DfT- appointed chairman of the East Coast Partnership franchise. These are organisations that understand the underlying cost drivers of operations. There is also no room for the official passenger watchdog Transport Focus, while there are two representatives out of six from NR Route Supervisory Boards.
With a potential gap in credibility, it is crucial that Keith Williams provides the skills and experience not to underwrite policies that count against the adoption of the customer interest.
As a former Chief Executive of British Airways, his period in office started in the middle of a two-year dispute with cabin crew that had cost the company £150 million in strikes and stoppages.
This is not a dissimilar situation from efforts to expand Driver Only Operation, which has faced a brick wall of opposition from the RMT union, consistently backed by staff in ballots for strike action.
The BA issues were resolved by developing a relationship with Unite General Secretary Len McCluskey, and by making a point of regular face-to-face contact with disaffected staff which finally enabled planned cost reductions to take place. Operations were also slimmed down by selling off smaller businesses such as Deutsche BA and its own low-cost operator BA Connect, while expanding routes which had the potential for profitability.
There has been a search for cost reduction by the TOCs, in the main driven by the level of premium payments offered to the Government for the right to run services. Unrealistic forecasts for revenue growth have led to measures that have removed frontline staff.
Directors and Senior Managers are no longer seen at stations, except for staged ‘meet the manager’ events. The same applies to contact with many stakeholders such as local authority officials. Not even the recent service disruption (as a result of timetable changes) persuaded those in charge to make ad hoc station visits, to learn from the staff immediate actions that could be taken to improve the situation for passengers.
As deputy chairman of John Lewis, Williams is in a leading role that promotes the value of frontline staff as partners in the business. He will be used to talking to these individuals, and should repeat that in a railway context… but he won’t like what he hears.
“Directors and Senior Managers are no longer seen at stations, except for staged ‘meet the manager’ events.”