‘It’s the perfect time to reshape the industry’
Network Rail’s chief executive Andrew Haines gives his take on the present and future shape of the rail industry.
PASSENGER levels are currently 45% overall compared to pre-Covid February 2020, with short distance leisure travel at 75% and commuting/business travel at just 20%, according to Network Rail’s chief executive Andrew Haines in an industry briefing on June 23.
Travel patterns have changed, he said, presenting a massive challenge and opportunity for rail. Many commuters want to use rail but, with working from home set to continue, commuting will have to change.
For this reason Mr Haines was asked to set up a cross-industry Rail Revenue Recovery Group last December, and was ready to launch a marketing campaign to welcome people back once lockdown is fully abolished.
Industrial relations
Following a number of days of industrial action, Mr Haines said a framework agreement had been signed with the trade unions in mid-June that importantly recognised changes are needed in the workforce and working practices.
He was optimistic this would bring a more collaborative approach than the typically adversarial approach, which has damaged the industry historically and has not served anybody particularly well.
“The major unions, operators, Network Rail and Westminster absolutely recognise that if we can approach this constructively, it will be a better outcome for taxpayers and colleagues,” he said. “We at NR are absolutely committed to give it our very best shot.”
The Williams-Shapps report is described as a key moment in the rail industry. Haines worked in the rail privatisation Policy Unit in 1992/3 when the John Major Government decided rail privatisation would be a Treasury-led flagship policy to fundamentally reduce taxpayers’ contribution to the railway.
“This created a model absolutely not designed to facilitate or even accommodate growth,” said Mr Haines. “It was designed to ensure competition for franchises reduced the overall subsidy, with the presumption that the railway wouldn’t grow.
“Since then we’ve had phenomenal growth, and we now have a Government committed to grow the railways, and to decarbonisation, as in the White Paper published on May 20. At the top of Government there is not a scintilla of appetite to use the Covid crisis to shrink the overall footprint of the railway, but there may be service level changes.
“The new system needs to create a degree of separation from the Government and the White Paper, due in Parliament late next year, recognises this in seeking to avoid overpoliticisation.”
The Haines-led Network
Rail reorganisation has been endorsed by the Government and will be reflected in the proposed legislation. “The new plan needs to be sustainable, affordable and passenger and freight centric and of course ultimately green,” he said.
“This is a genuinely fantastic time to reshape the industry because of Covid, and the
Prime Minister is passionate about infrastructure development. I’m looking forward to playing my part with colleagues to make a start.”
Leisure travel contributes more to the economy than commuter traffic, but current ticketing arrangements are complicated. With more working from home now, it remains to be seen how the flexible ticketing policy will work. The compulsory reservation policy by some long-distance operators will not help this rail segment recover, but given that enforcing social distancing was impossible on trains to and from Wembley for the UEFA Euro 2020 football matches, this might be a pointer to the future.
Penalty payments
The much-criticised contractual Schedule 8 penalty payment regime, in which delayed trains trigger compensation payments, was a result of the blame game played by everyone to generate income.
Many franchise business cases were predicated on generating profit from infrastructure failures when Railtrack (and later Network Rail) had to pay compensation.
In contrast, the operator of TfL’s London Overground concession has to pay TfL for any NR-caused delays, meaning they have to work together to resolve issues rather than argue about compensation.
Timetable changes
The Department for
Transport’s franchise specifications have been the main driver for timetable changes, making subsequent major improvements virtually impossible and – for example – it is very difficult to optimise the East Coast timetable change in May 2022 because of conflicting contractual rights, despite spending £1.5bn on upgrading the route.
When asked why the plan for East West Rail did not include electrification, Mr Haines described this as ‘sub-optimal’, adding: “I can’t believe it will be a diesel railway for very long. I know Mr Shapps is very keen on that. EWR has been a tricky project for the DfT to get cleared as it’s a major project carried out in stages, and each stage requires Treasury approval.”
All major projects are being increasingly hit by emerging risk in two areas: rising cost of materials, and lead times for order fulfilment.
Steel prices, for example, have significantly increased while delivery times have tripled for some other commodities, so they have to be planned well ahead. In addition, fixed price contracts that run over years are affecting contractors as they will need to absorb price increases.