Christian Wolmar
EU and privatisation.
SORRY reader, it is difficult to escape Brexit at the moment. I’ve just spent three days at the European Transport Conference in Dublin, where it was hard to avoid the B word, even though everyone is pretty exasperated by it all.
As regular readers know, I am a strong Remainer. But a couple of the presentations did expose some of the reasons why hostility has grown towards the supranational body that the EU has become.
The structure of rail privatisation a quarter of a century ago was, in fact, determined by our membership of what was then the Common Market - and its legacy remains with us. Older readers will remember the fuss around the meaning of 91/440, the European regulation that mandated the separation of the infrastructure and the operations. The Conservative government of John Major interpreted this as requiring the British Rail system to be split rigidly between the two functions when, in fact, it required merely an accounting separation between the two.
The recent memorial marking the 20th anniversary of the Ladbroke Grove crash was a reminder of the disastrous consequences that resulted from this ill-thought-through and hasty upheaval. The vertical separation of the railways, which across the world and over the course of history have nearly always been run in an integrated way, remains the policy of the EU - entrenched in the recent Fourth Railway Package.
The legislation was intended to kick the railway industry into the 21st century as a modern, competitive business that had the right incentives to grow and to cut costs. Oddly, it has not worked out like that. Driven by the neo-liberal ethos of the time, the legislation was focused on opening up the rail network to competition, with very little emphasis on improving the lot of the passenger, facilitating investment, or (indeed) reducing costs.
At the conference, in an excellent analysis of the outcomes of British rail privatisation, Professor Austin Smyth of Transport Analysis and Advocacy Ltd (who wrote the paper with independent rail consultant Edward Humphreys) showed how the much-touted claim of separation and privatisation being more efficient is not borne out.
For example, the figures on productivity are revealing. The McNulty report back in 2011 had already highlighted a rise in the number of staff per passenger kilometre (that metric gets round the problem of the fact that increasing passenger numbers should, in any case, result in extra staff).
McNulty made various recommendations to improve productivity, but clearly these have not achieved the desired result as the situation has worsened. Figures analysed by Smyth and Humphreys for the period 2011-18 show that costs per passenger kilometre went up by 62% at a time when inflation rose by less than half that.
Of course, one could argue that the fact that staff costs have gone up by 50% in that period while passenger numbers have only risen by 26% suggests that there is a better level of service, but I doubt many regular users of the railway have observed any such thing.
It was rather ironic that we were in Ireland, where both south and north received EU
derogations from the need to separate operation from infrastructure - and there is little sign that they have missed out. We were given a tour of the Control Centre in Dublin, and I was struck by the dedication of the staff and the thoughtful way in which they approached problems. Although notionally there is separation, in effect there is still very much a feeling that they all work for one organisation and that they are there to serve the public. As the manager who showed us round put it: “We are not here to run a railway, we are here to move people from A to B, mostly by train.”
Smyth and Humphreys have collected figures for the Northern Ireland rail service, where passenger kilometres have risen by 83% since 2011, and yet staff costs have been reduced by 11% and staff numbers by 4%. And guess what? Northern Ireland Railways has a derogation from the EU, and therefore has operated as a single integrated railway with no separation between infrastructure and operations - rather like, dare I say it, British Rail.
Smyth rightly asked: “Are costs out of control? And if so, what is the Rail Delivery Group, formed at the instigation of McNulty, doing?” Or, if it is a failing of franchising: “What is the DfT doing?”
It is difficult to argue with Smyth’s fundamental point that the current Williams Review is little different from the McNulty report, and therefore (he asked): “What is the point of these successive reviews?” Are we just going to get a whole lot of suggestions which politicians either ignore or meld into their own agenda?
Williams was supposed to be different - the review that will bring about genuine change, with a supposedly independent chairman. But already it seems to have been hijacked by the Government, if the rather incoherent briefings from Boris Johnson about abolishing franchises are anything to go by. This is despite the fact that soon after Johnson took office, the new West Coast franchise was awarded - with little difference to its predecessors apart from a little added complexity. There has, in fact, been a stream of statements from the new set of ministers saying that operators’ rewards will be linked to performance - something that has been happening for 20 years, but clearly these politicians have no idea of how the system works.
Smyth also focused in his lecture on the fact that Williams’ remit did not include anything on Brexit. Yet Brexit could (I am writing having not the foggiest notion, like everyone else, about what may emerge in the final couple of weeks of October) have a very damaging effect, argues Smyth - especially if the UK crashes out without a deal.
There are the obvious uncertainties affecting Eurostar, such as the licensing of drivers and enhanced passport checks which could lead to lengthy delays. Freight through the Channel Tunnel could be affected - currently there are special fast track arrangements, but these may have to be changed when the UK leaves the EU. Already, there has been the loss of grants from the EU for station improvements and other infrastructure projects.
And then there is the uncertainty for the many EU employees in the industry who may well think that they are no longer welcome here (probably the most damaging effect of Brexit).
In the medium term, the biggest consequence of Brexit may be the reduction in passenger numbers if there is a big downturn in the economy, although the Rail Delivery Group has done a lot of useful work on this - most of it on the basis that there would be a deal. Crashing out could have immediate consequences on the rail industry.
Some people have argued that it is our membership of the European Union which helped create the messy privatisation and everything that ensued. However, this was not the case. As mentioned above, it was the Conservative government which devised the complex structure of privatisation that emphasised the separation far beyond what was needed to follow EU rules.
An incoming Labour government could quite easily renationalise the railways without falling foul of EU rules. The accounting separation would have to remain, but essentially most of the major European nations have railways where both infrastructure and most of the operations are state-owned. It’s just convenient to blame the EU.