Is the Future Brightening for Britain's Railways?

I’m not a fan of privatisation, never have been, never will be. The idea of it for any vital service, for example hospitals, schools, or social services, having private business involved actually makes my skin crawl. Once there is profit involved, many companies try to minimise costs and maximise profit by stripping bare their services, to the detriment of the quality of service.

Indeed, this was what happened in 1997 when Railtrack took over the maintenance of the infrastructure of Britain’s railways. They stripped back the service, lost many of the knowledgeable staff they inherited from British Rail and sold off large parts of its assets to maintenance and renewal companies. As such, this resulted in an shortfall of engineering knowledge within the organisation, and as a result people sadly died. Thus, Railtrack was doomed after the Hatfield accident in 2000, in which there were 4 fatalities, as it couldn't tell anyone out exactly how many more accidents were waiting to happen. Subsequently, the state-owned, not-for-profit and largely unaccountable Network Rail took over the maintenance of Britain's railway infrastructure.

However, the private system remained in place above the tracks. This wasn’t a totally terrible situation, as the privatised railway companies cannot act as other industries do because of the nature of the industry. If you were to buy a car, companies would compete to produce the best products and use marketing to entice you to buy their model. Yet, ultimately, you’d be the one choosing which car to buy. Yet, the railway industry cannot really work in that way. For example, I’m live near Hampton Court station, thus, I am forced to use South West Trains and have no option about who I travel with as they are the franchise holder. Thus, because of this situation, the Department for Transport has to ensure that the services are put on by SWT to suit the needs of the passengers, so that they don’t just run the profitable peak-time services. Thus, private companies cannot act as they do elsewhere as they correctly forced by government to provide a certain level of service, which means I am guaranteed the ability to travel.

However, under the system that emerged after 2002 unnecessary things happened to both Network Rail (NR) and the Train Operating Companies (TOC). Firstly, Network Rail’s costs have skyrocketed because of bad management, institutionalised mind-sets and a lack of accountability to anyone. The best estimate is that currently NR is 30 to 50% more expensive per mile than the best European operators. This is because NR, in light of the accidents its predecessor caused, became overly focussed on safety as being its primary role. Indeed, money is spent on works whatever, even if the risk of a failure of a piece of railway infrastructure is less than 5%.

This sounds like I am advocating lax safety, I’m not, and there some elements of railway infrastructure that should receive these levels of investment. But think about it; if you attempted to make every workplace in the world 100% risk free it would be impractical, costly and time consuming. Further, on the roads there are 100s of deaths a year. But if we spent money on fitting them out with every device imaginable to stop accidents, the costs would be horrendous. Yet, on the railways that is what is done and it is simply unsustainable.

In addition, the added cost of this absolute focus on safety, is that NR has forgotten that part of its remit is to cooperate with the TOCs to deliver the best service to customers. Of course, many of the problems of cooperation between the organisations is the result of the Conservative government of 1992 separating the maintenance of the track from the operation of trains when privatising the industry. Some of the arrangements are pure lunacy. For example, if NR closes a line to make improvements that will benefit the TOC who operates it, it still has to pay compensation to the TOC. In addition there are a myriad of contracts between NR and the TOCs that foster contractual, rather than operational working relationships. Lastly, where in the days of British Rail the train drivers and station staff would know the the signalmen and track crews, now they do not cooperate. Thus, NR, while working in the same industry as the TOCs, very rarely acts like it has an interest in providing the best service to customers because their organisational mind-sets have separated.

The second thing that happened was that the DfT has increasingly micromanaged the Train Operating Companies to the point where literally nothing that they do is of their own making. The DfT’s control over the franchises, which was originally in place to ensure that passengers would receive a good service, has gone over the top. The effect has been that the innovation that private companies can bring to the table, and which is sometimes lacking in nationalised companies, has withered and almost died. Therefore, instead of the DfT specifying how many trains a company should run per hour, it now specifies how many there should be and when they should run. It also tells the TOCs how long their trains should be and what types of rolling stock they should use, diminishing their incentive to buy new carriages themselves. Thus, the DfT have effectively stifled any innovation that the private companies had.

Thus, because of these and other problems, that I simply do not have the space and time to go into, organisations that should have been dynamic and innovative simply stagnated. The result was that costs soared, and whereas in the early 1990s Britain’s taxpayers contributed around 40% to the running of the railways, currently the contribution is around 50%. As such, in February 2010 the former Secretary of State for Transport, Andrew Adonis, appointed Roy McNulty to head a review of the structure and costs of Britain’s railways. Yesterday, McNulty published his interim findings. Firstly, they explained the current problems with the industry. However, they also spelled out proposals that might actually make the railways more cost-effective, innovative and provide better services to customers.

Firstly, and this is something that I have banged on about before, he suggested that there should be a more focussed definition of what the railways are actually for, with ‘greater clarity and better alignment of objectives.’ The long-term goals should be to facilitate the efficient movement of goods and passengers, while ensuring the industry’s long term value for money for both the taxpayer and the passenger. While naturally people will scream and shout about fares, and I will shout with them too, reducing the cost of NR is absolutely necessary and in the long-term may actually help to bring fare prices down. But, crucially, it will also bring the contribution of the taxpayer down.

Secondly, he wants the ‘Government [to be] involved in less detail, and the rail industry accepting greater responsibility for delivering the broad objectives set by Government.’ The report also recommends longer franchises of 15 years or upwards. These are excellent recommendations. Of course, the DfT has to ensure that passengers have a minimum level of service, but if the TOCs have more freedom to innovate, buy their own rolling stock and have longer franchises, they may invest in a better service to tempt you away from other forms of transport, as this will increase their long-term revenue generation.

Third, he suggests more cooperation, coordination and goal-alignment between NR and the TOCs that will focus both on both cost reduction and the provision of good services. Indeed, while he recognised that some technical functions have to be managed nationally and can only be done by a single organisation, he argued that regional alliances should be formed and closer working initiated between local NR mangers and the TOCs. This will allow both the organisations to operate more harmoniously, plan future operations better, have improved leadership and focus on the needs of the service in a local area. Ultimately, with such an approach, costs can be driven down. This will be accompanied by a reorganisation of NR, which is sorely needed and better overall leadership of the industry from the DfT.

I will always support renationalisation, but I accept that this reality won’t come soon. As such, my philosophy is that we should try and make the private system work as well as it can. There will always be issues, and I feel that the imminent fare hikes are a mistake. Yet, this said, I am very pleased with the initial findings of the McNulty report as he has echoed what many in the railway press and industry have been saying for years. Hopefully his recommendations, the implementation of which will be overseen by a high level group chaired by the Secretary of State for Transport, Philip Hammond (a man I am begrudgingly starting to not dislike), will usher in an era when the private system finally starts to work as efficiently as it can. We still have a government which I dislike intensely and I will always remain cautious about any proposals that emanate from it, but I always try and remain positive, and as such I think that the future is brightening for Britain’s railways.

Beeching, Serpell, McNulty and the Future of Britain's Railways

Apparently, and I am not entirely sure how this passed me by, there is a ‘value for money’ review being undertaken on Britain’s railways. The man at the helm is Sir Roy McNulty (shown) who apparently is an air transport specialist and was the former head of the Civil Aviation Authority. Exactly, therefore, how worrying his appointment is, is uncertain, as McNulty’s career history includes both public and private activities. The reason for my confusion stems from the fact that those who have previously tried to get more ‘value for money’ out of the railways, namely Sir Richard Beeching (the Railway Satan as he has been called) and the more forgotten Sir David Serpell, had two different backgrounds that clearly shaped the way they conducted their reviews of the costs of the network. Therefore McNulty’s mixed career history means that his report could be anything from fair and even handed to a massive axe-swing in the direction of Britain’s railways.

So how should Beeching and Serpell’s reports be judged in light of their career histories? First, let us turn to Beeching. Beeching, who came to British Railways from ICI, doesn’t really have a good reputation amongst the public. But then again I have always felt that the man has been treated unfairly in that he was brought in to do a job and he did it. In 1963 he wrote his famous report, The Reshaping of British Railways. His proposals rather cheesed people off as he proposed closing 6000 miles of railway (out of 18,000) and shutting 7000 stations. This would make it possible for British Railways to lose 70,000 employees over three years. But then again it was the Secretary of State for Transport, Ernest Marples, who brought Beeching in, and Marples was the one who actually implemented the report’s recommendations. Additionally, Marples was a fan of road transport given he had owned road-building company (Marples-Ridgeway) who had just got the contract for the M1. Therefore, it is clear that the prism through which Marples saw the railways was simply as a wasteful, inefficient business, and it is unlikely that he acknowledged its social or economic benefits to the nation, especially as he was so married to road transportation. Simply put, the railways were only a drain on the nation’s finances. Therefore, in response to the profitability problems of British Railways, he brought in a businessman (Beeching) to solve a business problem and once his recommendations were implemented they did irreparable damage to the network. Beeching was, however, not a railway professional and didn’t have experience in network industries. As such he simply looked at the railways as a business and not its social or economic benefits. Therefore, was the outcome really that surprising? I think not.

While the Beeching cuts are well known about because they actually occurred, the Serpell report, released in March 1983 has largely sunk into the bog of history because none of it got implemented. On a backdrop of a suffering economy, British Rail’s revenues decreasing and the lowest number of passenger journeys taking place in the network’s history, it was ordered by the Thatcher Government to look at the long-term role of Britain’s railways and make British Rail pay. After much work Sir David Serpell, a long-term civil servant, recommended a range of ‘options’ to change the network. The first, Option A, would reduce the rail network by 86% and the passenger train miles by 56%. In short, all that would be left would be the East, West, Great Western and Great Easter main lines, as well as a number of main lines to the south coast (the plan is shown). Yet, while everyone has focussed on this option, principally I presume because it looks so horrible, people forget that he presented three others. In Option B the cuts proposed in Option A would be implemented, but with the suburban network remaining. Option C kept much of the network in place, but with the removal of loss-making services (however there were three sub-options that can be looked at on Wikipedia if you so wish). Lastly, option D ignored the main goal to make the railways profitable and retained lines to populated areas with over 25,000 people. However, many small stations would be closed.

Serpell I think has also got a bad reputation, however I think he was a better man for the job he was asked to do than Beeching was for his. If I listed his civil service career between 1937 and 1982 it would take a whole paragraph. However, some of the major departments he had worked in were the Ministries of Food, Fuel and Power and Trade, the Treasury, the Department of Education and the Board of Trade. He also had worked for National Conservancy Council, the Ordinance Survey Review Committee and had been a member of the British Railways Board (BRB) between 1974 and 1982. In sum, Serpell had had a varied career that brought him a lot of experience in many government departments and plenty of these dealt with social, rather than economic, issues. He also had some (unquantifiable) experience of railways being on the BRB. Therefore, given the cost cutting nature of the Tory Government of the early 1980s and the tremendous economic constraints that government put the nation under, I feel that perhaps Serpell did well given his circumstances. Everyone screams and shouts about the first option, however the range of options that he presented does suggest that he was thinking more deeply than Beeching about the rail network. Firstly, in the age of austerity of the early 1980s he satisfied his brief of presenting different options to make Britain’s railway network pay. Fair enough, that’s what he was asked to do. However, the mere fact that he presented Option D, that defied his brief, suggests that despite being constrained by his environment of economic stringency and a cost-cutting Conservative Government, he did have an eye on the social and economic implications of rail transport. This, I would suggest, may have in part stemmed from his varied civil service background that showed him that how a range of different government agencies added to the nation’s health indirectly. I think, for Serpell, he had to show that railways were not just about the ‘bottom line’ as they were for Beeching, Marples and many in the Thatcher Government.

Thankfully, the Serpell report was dropped quietly because of the outcry. Indeed, throughout the mid and late 1980s passenger numbers rose and the issues confronting the network seeped away. However in the current climate we face new challenges and the coalition has deemed it necessary to commission another report looking at the ‘value for money’ of the rail network. As stated this will be under Sir Roy McNulty, the former head of the Civil Aviation Authority. He will also be assisted by some unspecified ‘rail professionals.’ Considering his background alone, McNulty has some of the attributes of both Beeching and Serpell. Firstly, like Beeching, he has had an extensive career in business, working at Chrysler UK, Harland & Wolff, Peat Marwick Mitchell & Co., Short, Bombardier Aerospace, Norbrook Laboratories Ltd, and the Ulster Bank Ltd (amongst other things.) Yet, in his more recent years, like Serpell, he has worked for the government on the Olympic Delivery Authority, the Steering Group for UK Foresight Programme, the Northern Ireland Growth Challenge, the Technology Foresight Defence and Aerospace Panel and the Department for Trade and Industry’s Aviation Committee. Admittedly, these were consultancy and committee posts, and not like Serpell’s career in the Civil Service, yet, it does mean he was engaging with governmental activities of a social and economic nature. Lastly, very much like Serpell, he had his spell on a high-profile transport body as he was head of the Civil Aviation Authority.

Therefore, with this résumé it seems that the impending report could go one of two ways. He possibly may do a Beeching and recommend cuts to services, lines and the suspension any new developments. However, he could, and I think this is more feasible given the record rail usage at the moment, recommend cuts and efficiencies within Network Rail (which has infrastructure costs 30-50% higher than those on the continent), the suspension of any large capital investment, changes to the franchise structure and the cutting of some of the most unremunerative services. Thus, this would in part be like of some of the less violent options put forward by Serpell. One thing is for certain, the cost of maintaining and running the British railway network has to come down, and McNulty’s background and experiences will in some part shape the outcome of the review like those of who were tasked with the same job before. On the flip side, we don’t know what part of his past will have the greatest effect on the report and therefore we wait…biting our nails.