Christian Wolmar
A single united organisation.
LET’S look to the future for once, given that the present is so bleak. There is no doubt that out of the chaos, a new structure for the railways will be needed.
Once the present Emergency Measures Agreements run out in September, there will be an interim period during which some kind of new arrangement will be cobbled together. The thinking on this has been vague, but it is likely that there will be an incentive for the train companies to boost passenger numbers - perhaps like the contracts on the London Overground, where the operators receive a bonus when passenger numbers go up.
The targets are likely to be set very low, given that usage of the railways will perhaps (optimistically) have reached 30% of preCOVID levels. But the Department for Transport is insistent that the train operating companies need incentives to ensure that they perform efficiently.
I have always thought that this is ideological claptrap, a keystone of right-wing ideology with its belief that people only behave with their own interests in mind. Within this set of values, there is the unchallengeable view that the public sector will never provide a good service because there is no such incentive. My view is that the level of service is determined by the quality of management and by good choice of staff. But that is deemed unrealistic and old-fashioned by those who insist that even top managers need to be paid a bonus to do their job properly.
Nevertheless, there is a problem with the present arrangement of management contracts handed to the existing private companies for a 1.5% mark-up boosted by 0.5% incentive, which I am told is very easy to obtain. This is the worst of all worlds, because private companies that have no interest in keeping costs down are running the trains. This clearly needs to be changed.
A group of experienced railway professionals, the Rail Reform Group, have come together to try to work out a way forward out of the twin crises of the collapse of the existing rail franchising model together with the collapse in rail usage during the pandemic. The key suggestion in its paper - Elephant on the
Line: time for vertical integration ( https:// railreformgroup.org.uk/) - is, as the title suggests, a return to the structure that most railways across the world have operated through for most of history: a vertically integrated railway.
I have always argued that the only sensible way to run a railway is through vertical integration. Railways are essentially one business, the provision of transport services in coaches or wagons that are limited in where they can go by the infrastructure. The idea of separating out train from track has always been flawed - dreamt up by the ideologues of the Treasury who hated the British Rail monopoly and taken on by the European Union in order to break up the admittedly inefficient railways of Eastern Europe. It was never a good way to run a railway.
As the paper’s author David Prescott argues, the key aim in the new structure must be efficiency. As I have argued since the outbreak of the pandemic and the sabotage (as Sir Michael Holden put it) of rail’s market, the hound dogs of the Treasury will be out to attack the railways. Given that the subsidy to
keep them going will be double or more previous levels.
The counter, therefore, has to be to make them more efficient. That will mean an emphasis on new technology (even though this rarely leads to massive savings), on flexibility (such as a simpler ticketing system), and on cutting costs. At the moment, there is no incentive to do so under the existing structure.
An integrated railway is more efficient because it is much simpler to operate. Chuck out all those bureaucrats in the Office of Rail and Road (my target for closure anyway) who spend millions on trying to ensure there is scope for competition in the railways.
Remember those dozens of lawyers who spent weeks in courtrooms to try to work out who should have paths on the East Coast Main Line? Or the ridiculous situation we had when franchises were let on the basis of timetables that Network Rail could not actually deliver? Yes, a few open access operators will be forced out of business (I actually quite like Hull Trains and Grand Central), but the hidden cost of enabling them to operate is simply not worth the trouble.
Prescott (a long-established railway manager) puts it well: “There is now no single guiding mind at any level in the industry. In its place is a mass of bureaucratic process across the industry, including funders, to regulate the contracts and interfaces. The linkages between costs and benefits, which are so fundamental to the operation of an efficient industry, have been completely lost and with it all natural pressures on cost control.”
I rather liken it to when the Greater London Council was abolished in 1986, which left the capital without a ’guiding mind’ for 14 years. It is only since the return of the mayoral system that London has benefited from mega-projects such as Crossrail, and policies such as boosting bus and rail services and implementing the congestion charge. The railways need a coherent strategy that can only be delivered by a single united organisation.
Prescott points out that the DfT has not been totally opposed to vertical integration - such a model has been sanctioned for the redevelopment of the Valley Lines around Cardiff, and (surprisingly) for the new East West route that will eventually link Cambridge and Oxford. He recognises that possibly different models may be required for suburban and long-distance routes, and even suggests that open access operators might be accommodated.
Freight operators, who are wary of vertical integration, would be guaranteed a right to operate over most infrastructure, he says. While I support increased freight, there is no reason why there should not be some kind of small regulatory office (much smaller than the present ORR) to ensure that their needs are accommodated.
This is our chance to sort out the railways. The structure that has endured and creaked ever since I travelled on that first 0510 Stagecoach train from Twickenham to Waterloo on February 4 1996, with its army of ticket inspectors early on Sunday morning, can now be laid to rest.
It is not (to use one of those ghastly business expressions) ‘fit for purpose’ and now never can be, given that no private sector organisation is going to take revenue risk for years to come (if ever). It was always ‘pretend capitalism’, a game played between the DfT and a bunch of bus companies who could see the potential of a fast buck. Management contracts are all very well but do not really add any value to the railway, and one has to ask why the private companies are being paid 2% to do not very much.
Therefore, as Prescott says, the options are clear: “Tinker around the edges with an inherently cumbersome, bureaucratic, unresponsive, expensive and non-customerorientated railway industry OR move to a much better-defined, locally integrated, customer-focused, cost-effective and valueorientated group of railway operations.”
Unfortunately, with the ideologues in government and the hawks overseeing the process in the Treasury, I do not feel optimistic… but one can hope.