Christian Wolmar
A game-changer for rail.
HAROLD Macmillan used to say that what he was most worried about when Prime Minister were “events” - or as Donald Rumsfeld, the one-time American Secretary of Defense, put it: “unknown unknowns”.
Well, Coronavirus is certainly both of those things - an absolutely unprecedented health crisis with untold huge long-term effects to the economy in general and to the transport sector in particular. This is a game changer in many ways, and not just for the short term. I suspect that the crisis will transform the pattern of work, accelerating trends that were already coming to the fore.
The industry faces an unprecedented and immediate crisis. As more and more people shift to working at home, events such as sporting fixtures and conferences are cancelled, and business people take to Skype and videoconferencing rather than train travel, the numbers using the railways are bound to plummet.
My best guess is they may well reduce by up to 50%, given that there are already reports of 20% falls, and it’s only going to get much worse. I suspect that not a single franchise will remain in the black if, as has been suggested, the peak of this crisis will not be reached for a further ten to 14 weeks. The 2008 financial crisis will seem like a Thomas the Tank Christmas outing compared with what’s about to hit the industry.
Personally, I am not going to take a train unless I really have to. Half a dozen of my planned business and leisure trips have already been cancelled and more will follow. I am avoiding the Tube and sticking to my bicycle whenever possible.
It took a while for the industry to react, but it seems that there are now ongoing negotiations with government. Indeed, this column, written on Monday March 16, may well be out of date when published, but it seems that negotiations are taking place and Secretary of State for Transport Grant Shapps indicated on Radio 4’s Today that this was very much an unprecedented situation.
Frankly, it is difficult to see how any bailout will work, and therefore a whole restructuring of the industry will be needed. My perennial question of ‘what is franchising for?’ will finally be made redundant.
The airlines have asked for the same sort of help as the railways - Virgin Atlantic is seeking a staggering £7.5 billion, although others were not necessarily behind that request.
It is clear that a couple of weeks of travel bans will push them over the edge, given their huge fixed costs, but is it acceptable for the likes of Virgin Atlantic, British Airways and Ryanair to be rescued by us, the taxpayers? Remember none of these are wholly British companies and therefore it would have to take multi-national negotiations to sort out any bailout arrangements. And why should this burden fall on the state?
There are measures such as not requesting tax and rate payments that will help both airlines and railways in the short term, but it is difficult to see how governments can go further without a major and permanent shift in how the economy is run. If the airlines are bailed out, surely that would be in return for a stake in the ownership, as happened with the banks in 2008.
The more this crisis intensifies, the more it feels like we are on a war footing, and that the only relevant and relatively recent comparator
is the Second World War.
For the railways, the obvious answer is simply to turn the franchises instantly into management contracts with the Government taking the financial risk for both revenue and cost - in other words, de facto state ownership.
The Government wants the railways to keep running, not least because so many people rely on them to get to work and because they are recognised as a fundamental service. However, Shapps intimated that it might well be necessary to cut back the number of services, and that would only be possible by scrapping the existing contracts.
On that basis, it is difficult to see how franchising will ever be reinstated. This will make it easier to create the new structure, contained in the long-delayed Williams Review, as effectively there will be a clean slate.
Ironically, the collapse of the system may well be helpful in pushing through changes on ticketing. According to a report in The Times on March 14, the delay to the publication of the White Paper based around the Williams review was over Treasury concerns that a more rational and sometimes cheaper ticketing system would lead to an increase in subsidy, even though many in the industry think that this might actually lead to an increase in revenue.
One rail industry insider was quoted as saying: “Typical risk aversion on the part of the Treasury risks the railway being left behind by other industries that are utilising technology to transform how they sell their services.”
So, the good news is that if the whole burden is falling on the state, then the Government may as well sanction changes that could reduce overall subsidy.
Given the depth of this crisis, Williams may become an irrelevance. In any case, the longterm changes resulting from this crisis are likely to be profound.
Already in recent years we have seen a decline in season tickets, and how Friday has become the only day when regular commuters can find a seat on a train that is crowded on other weekdays.
These are both trends that are set to become more entrenched given the emphasis on working from home due to the virus. Once people have realised that they can work at home some or most of the time, and employers have begun to establish monitoring procedures and to assess the results of what is an experiment on a grand scale, this will result in a permanent shift. One crucial aspect is that the IT systems designed to enable them to do so have been put in place at thousands of work places, and these will not be removed.
Therefore, the railways face both a shortterm crisis and a long-term reappraisal of their role. Add in uncertainties caused by Brexit and by the structural issues that have been addressed by the Williams Review, and 2020 is all set up to be an annus horribilis for the railways.
But, putting on my optimist’s hat, in the long term a more rational and sensible structure may emerge.