In­sider

Wil­liams de­flects call for re­turn to failed or­gan­i­sa­tional struc­tures

Rail (UK) - - Contents -

Seven Pil­lars of (rail) Wis­dom.

It is right that Keith Wil­liams should seek wider stake­holder opin­ion about a post­fran­chis­ing rail struc­ture, which in­cludes a call for in­ter­ested par­ties to sub­mit writ­ten ev­i­dence by Jan­uary 16.

A good start­ing point in as­sem­bling ev­i­dence is to look at the cur­rent gen­eral du­ties of the Sec­re­tary of State for Trans­port and the Rail Reg­u­la­tor (con­tained in the 1993 Rail­ways Act), and judge el­e­ments that should change (if any) as a re­sult of ex­pe­ri­ence over a 25-year pas­sage of time.

There have been sub­se­quent Acts of Par­lia­ment in 2000 and 2005 that first cre­ated a Strate­gic Rail Au­thor­ity and then abol­ished it in favour of a Rail Man­age­ment Group at the De­part­ment for Trans­port, to­gether with the pow­ers nec­es­sary for the de­volved Scot­tish Par­lia­ment and Welsh Govern­ment. These changes did not al­ter the ba­sic pre­sump­tions in the 1993 Act, which have con­tin­ued to be ap­plied with var­i­ous de­grees of en­thu­si­asm.

The gen­eral du­ties be­low could be seen as the equiv­a­lent of ‘Seven Pil­lars of Wis­dom’ ap­plied to pas­sen­ger and ‘goods’ traf­fic. It is un­likely the in­dus­try will ben­e­fit from any abo­li­tion of these goals, given the transformation in de­mand that has taken place as a re­sult of the frame­work.

To pro­tect the in­ter­ests of users of rail­way ser­vices.

To pro­mote the use of the rail­way net­work for the car­riage of pas­sen­gers and goods, and the de­vel­op­ment of the rail­way net­work - to the great­est ex­tent eco­nom­i­cally prac­ti­ca­ble.

To pro­mote ef­fi­ciency and econ­omy on the part of per­sons pro­vid­ing rail­way ser­vices.

To pro­mote com­pe­ti­tion in the pro­vi­sion of rail­way ser­vices.

To pro­mote mea­sures de­signed to fa­cil­i­tate the mak­ing by pas­sen­gers of jour­neys that in­volve the use of the ser­vices of more than one pas­sen­ger ser­vice op­er­a­tor.

To im­pose on the op­er­a­tors of rail­way ser­vices the min­i­mum re­stric­tions which are con­sis­tent with the stated pro­vi­sions.

To en­able per­sons pro­vid­ing rail­way ser­vices to plan the fu­ture of their busi­nesses with a rea­son­able de­gree of as­sur­ance.

On the first point, the re­sult was the cre­ation of a Pas­sen­ger Ser­vice Re­quire­ment that pre­vented any with­drawal of ser­vices and pro­vided timetable guar­an­tees such as the pro­vi­sion of first and last trains.

This was a sig­nif­i­cant de­vel­op­ment - pre­vi­ously BR had been re­quired to eval­u­ate pro­vid­ing bus ser­vices on many routes as an al­ter­na­tive to in­fra­struc­ture re­newals. As a re­sult, bus sub­sti­tu­tion pro­pos­als were sub­mit­ted at vary­ing times be­tween 1982 and 1989 - and these in­cluded some sig­nif­i­cant loss of con­nec­tiv­ity with ser­vice with­drawals across the coun­try.

The con­cept of con­trolled fares was also es­tab­lished to pro­tect pas­sen­gers (par­tic­u­larly sea­son ticket hold­ers) from any abuse of mar­ket power, al­though in re­cent years the use of the Re­tail Price In­dex (RPI) as a bench­mark has negated this as a re­sult of pol­icy to in­crease fare­box rev­enue as a pro­por­tion of in­dus­try costs.

To pro­tect con­tin­ued freight op­er­a­tion, a regime was es­tab­lished to pro­vide grants to op­er­a­tors where track ac­cess charges caused the price to the cus­tomer to be higher than the mar­ket. In­vest­ment in ter­mi­nal fa­cil­i­ties was aided by a Freight Fa­cil­i­ties Grant process.

There has been great achieve­ment in pro­mot­ing the use of the rail­way net­work be­yond the ex­pec­ta­tion of pro­fes­sional fore­cast­ers, and stake­hold­ers as a whole. This has hap­pened be­cause man­age­ment be­hav­iours in op­er­at­ing com­pa­nies have been able to fo­cus on growth with cer­tainty about the cost of us­ing rail in­fra­struc­ture, which was not the pre­vi­ous po­si­tion.

After pri­vati­sa­tion, growth im­me­di­ately took place, and by 2003- 04 pas­sen­ger num­bers had reached 1,023 mil­lion. A 31% growth in pas­sen­ger num­bers over seven years did not hap­pen be­cause mar­ket cir­cum­stances sud­denly changed in favour of rail (as some un­in­formed com­men­ta­tors sug­gest), but be­cause more peo­ple chose to travel by train as a re­sult of im­proved mar­ket­ing and prod­uct de­liv­ery.

Freight shows sim­i­lar growth. From a nadir of 15.1 bil­lion freight tonne kilo­me­tres (FTKM) in 1996-97, that fig­ure grew by 25% to reach 18.9 bil­lion FTKM in 2003-04.

The pro­mo­tion of ef­fi­ciency and econ­omy in pro­vid­ing rail­way ser­vices has been achieved by the freight op­er­a­tors as pro­duc­tiv­ity in­dices have been trans­formed - for ex­am­ple, with the av­er­age size of trains, which are 80% larger than two decades ago. The re­sult of com­pe­ti­tion has led to large-scale fleet re­newal, in more ef­fi­cient lo­co­mo­tives and wag­ons, and high lev­els of work­force pro­duc­tiv­ity.

This is a com­plete con­trast to the pas­sen­ger mar­ket. The fail­ure to se­cure higher pro­duc­tiv­ity is what hap­pens when com­pa­nies are al­lowed a mo­nop­oly in an op­er­a­tional mar­ket - a fac­tor that has been ig­nored in the Govern­ment’s at­ti­tude to the op­er­a­tion of com­pet­ing pas­sen­ger ser­vices. It was never the in­ten­tion that fran­chises should be al­lowed to op­er­ate as con­tin­u­ing mo­nop­o­lies after the ini­tial Mod­er­a­tion of Com­pe­ti­tion regime.

The lack of com­pe­ti­tion and the knowl­edge that train op­er­a­tors were re­quired to in­crease con­trolled fares by RPI meant it was in­evitable that pay ne­go­ti­a­tions started with the as­sump­tion that staff would re­ceive sim­i­lar pay in­creases, which has proved to be the case. The sug­ges­tion that com­pe­ti­tion can be es­tab­lished by fran­chise bid­ding can be seen to be deeply flawed.

Pas­sen­ger use of ser­vices pro­vided by more than one op­er­a­tor has con­tin­ued, with the ORCATS com­puter ap­pli­ca­tion al­low­ing the al­lo­ca­tion of rev­enue be­tween op­er­a­tors. This has not been a con­tro­ver­sial part of the way re­tail­ing is or­gan­ised, and re­flects the con­tin­u­ing dom­i­nance of the ‘turn up and go’ mar­ket.

In terms of im­pos­ing the min­i­mum re­stric­tions for train op­er­a­tions ac­tiv­ity and the abil­ity to plan for the long-term fu­ture of busi­ness op­er­a­tion, the freight sec­tor has again pro­vided a bench­mark.

At the time of pri­vati­sa­tion there were two mo­nop­o­lies, with EWS pur­chas­ing five of the freight op­er­at­ing com­pa­nies of­fered for sale and Freight­liner ac­quir­ing the busi­ness as­so­ci­ated with in­ter­modal con­tainer move­ment from ports. The mar­ket has since been trans­formed by new freight op­er­a­tors, cre­at­ing on-rail com­pe­ti­tion. This must be the di­rec­tion of travel for pas­sen­ger op­er­a­tions.

It is im­por­tant that ev­i­dence, rather than sen­ti­ment, guides fu­ture change. In mar­ket terms the in­te­grated rail­way was not a suc­cess, and is un­likely to be so in the fu­ture.

“The sug­ges­tion that com­pe­ti­tion can be es­tab­lished by fran­chise bid­ding can be seen to be deeply flawed.”

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