Gourvish and Wolmar - TurnipRail's 2 Year Anniversary - Guest Posts

This is the last TurnipRail Two-year anniversary post, and I am glad to say I finish off with two prestigious guest posters, Terry Gourvish and Christian Wolmar.

Kevin Tennent, Me and Terry at Battersea Beer Festival, 2011

Terry Gourvish: On the first day of my PhD, my supervisor he handed me a book: 'Mark Huish and the London and North Western Railway.' I consumed it, gaining a fondness for a subject which, at that point, I knew little about. But beyond that, I was in awe of the author: Terry Gourvish. On our first meeting I was star-struck. Oh how things have changed. Indeed, over a pint in the Golden Ball, York, it was partially his idea to start the blog. Terry's had an extensive career. His two-volume history of British Railways is unsurpassed, and he authored the Official History of the privatised railways between 1997 and 2005  and the Channel Tunnel. Furthermore, he has written countless articles on railway history, a comprehensive history of Britain's brewing industry and on business history generally. He now heads the London School of Economics' Business History Unit. Indeed, Terry is someone I look up to immensely. Thus, I was overjoyed when he agreed to write a piece for the blog, and for that I owe him much thanks.

Should Passengers Pay Higher Fares?

This issue comes up every year, and produces the same sterile arguments from the main protagonists: Passenger Focus, ATOC, et al. How much of the cost of running the passenger railway should be charged to the ‘fare box’ is, of course, a matter for public policy. Some countries, e.g. France and Italy, have historically charged more to tax-payers than we do in the UK. If that is justifiable, then passengers should pay less here too. On the other hand, in countries which load the burden onto tax-payers, the operation represents a subsidy to rail users, who are in general not the poorer members of society that subsidies really ought to reach. I would say that increasing the fare box via higher fares is justifiable, but only if: 1] railway costs are as low as they could be; and 2] journeys made on the spur of the moment, i.e. non-APEX fares, are not punitively high.

Can we say that this is so? 

Christian Wolmar: Well, what can be said about Christian Wolmar that hasn't been said already? Christian is Britain's leading transport commentator, popping up on TV and Radio almost every week. But more than that, he has written widely about railway issues and history. The first book of his I read, many moons ago, was the 'Subterranean Railway', his engaging account of the history of the London Tube. Subsequently, I have consumed most of his other books, including 'Fire and Steam', 'On the Wrong Line' and 'Engines of War.' I also am an avid reader of his fortnightly column in RAIL magazine. Therefore, as an author whose writings I have thoroughly enjoyed through the years, I was thrilled when he agreed to write a paragraph for this anniversary. Many, many, thanks to Christian:

Without understanding history,we cannot learn its lessons. In the research for my various books, it is remarkable how the same dilemmas over railway politics have occurred throughout their history. Italian politicians, for example, were debating whether to nationalise their railways in the 1880s, and interestingly it was the Left who opposed state control. Discussions over open access to railways predate that by some decades and nearly all rail companies realised that providing the traction as well as the track was the best option, a lesson of history missed by those who supported the rail privatisation of the mid 1990s. Subsidy, too, has always been a thorny issue and subject to much handwringing from politicians. If only they understood the history and learned from it, they would not make the same mistakes as their predecessors. Maybe that is too much to hope for, but as historians – and I have become one by default – we must strive to educate today’s decision makers about how the past can inform them.

Lets get this straight, by the 1990s British Rail was very efficient!

On Monday I watched the despatches program that everyone is talking about that criticised the modern railway network. Boy, did I get frustrated. I wasn’t particularly concerned with the lack of descent analysis, nor with the dominance of subjective opinions. No, as a historian of the railways I got annoyed with the words of Steven Norris, one of the architects of British Rail’s (BR) privatisation in the early 1990s. In his view, BR was an inefficient and lazy organisation that did not give the taxpayer ‘value for money.’ Furthermore, he asserted that privatization was the only way to solve its internal problems. While I acknowledge British Rail did have a long history of inefficiency, what annoyed me was that this opinion flies in the face of all the evidence. Indeed, by the 1990s BR was, by all reasonable measures, one of the most efficient railways in Europe. Indeed, this post is about bursting Steven’s annoying little bubble. All figures are taken from the highly detailed history of British Rail by Terry Gourvish.

Firstly, a bit of background is required. From 1982 onwards the government shrunk BR’s budgets. Indeed, in 1982 central and local government funded BR to the tune of £1330.8 million (constant at 1989/90 prices). By 1986/87 this had shrunk to £950.8 million, and by 1989/90 the total funding was £568.8 million.[1] This reduction forced BR to become more customer focussed and led to a massive reorganisation of the company, named ‘sectorisation.’ Most importantly, it forced BR to become a more efficient organisation

If we consider that Britain's railways since the 1930s had never made overall profit, and consequently always required a subsidy from government to fund their operations, the level of loss that BR incurred in the 1980s and 90s would be indicative of the performance of the business. The central principal for BR operations under sectorisation was that the profitable parts of the business, such as Intercity, would actually reduce the burden on the taxpayer as they would mitigate losses incurred by other sectors that were loss-making, such as Regional Railways. The table below shows the profit and loss of BR's different operational sectors in certain years, as well as its overall total.

Source: Gourvish, Terry, British Rail 1974-97: From Integration to Privatisation, (Oxford, 2004), p.476-479

As shown, in 1982 Intercity, Railfreight and Network South East were all poor performers, with only Railfreight making a slight profit. However, all three became far more profitable by 1993/4, whether it be through cost control, greater efficiency, growing their trade, better public service or increasing their prices. Only BR’s Parcels service and Freightliner, the latter of which was a relatively new part of the business, did not improve their performance by 1993/4. Furthermore, Provincial and Regional Railways, which ran local lines and were effectively cross-subsidised by the other BR sectors, also became more efficient by 1993/4. Overall, the result was that by 1993/4 the burden on the taxpayer was £724 million, or 73.21 per cent less than it did in 1982.

Furthermore, most elements of BR’s costs reduced in the period. As an example I will look at maintenance costs, which declined significantly. The results are shown in the table below.

Source: Gourvish, Terry, British Rail 1974-97: From Integration to Privatisation, (Oxford, 2004), p.207

This indicates that between 1983 and 1989/90 BR’s maintenance costs dropped by 19 index points. However, the cost per train mile, which essentially relates BR's overall expense to the amount of work done by the organisation, fell by a massive 24 index points. While some of this reduction could be down to changes in the price of materials, there is no doubt that some, if not most, could be attributed to better cost control, improved operational practices and better project management.

But where did BR's efficiency stand against other European operators? The table below shows the number of kilometres that BR’s trains ran per member of staff in the period, against the average for the fourteen 'Community of European Railways' members (excluding BR).

Source: Gourvish, Terry, British Rail 1974-97: From Integration to Privatisation, (Oxford, 2004), p.292

Evidently, per staff member BR’s trains went further than thos of European operators. This was despite, in some cases, the British railway network being of a higher density than in many countries and requiring greater maintenance, more administration and having greater intensity of train movements. This means that BR was more productive per staff member than the European operators and that taxpayers were getting better ‘value for money’ from its operations. 

Lastly, because of efficiencies, the level of support that BR received in real terms also reduced over the period. The table below indexes the funding of British railways against three major European operators between 1975 and 1991.Source: Gourvish, Terry, British Rail 1974-97: From Integration to Privatisation, (Oxford, 2004), p.292

While the real terms funding of French and Italian railways by their governments increased over period (Italy  by a substantial amount) the German and British Governments reduced theirs. However, BR's superior performance is shown by the fact that the German government’s funding of Deutsche Bahn rose in the late 1970s, falling off in the early 1980s; whereas BR’s funding was reduced overall, reaching its lowest level in 1989. Indeed, of the four operators BR had had the least success in securing government funding over the period. Thus, while reducing its operating losses substantially and increasing some sectors' profitability, this data indicates that BR was, at the point it was privatised, highly efficient in comparison.

Therefore, Terry Gourvish’s figures have shown that in the 1980s and first half of the 1990s BR improved the profitability and performance of its business, reducing the burden on the taxpayer. By the mid-1990s it was one of the most efficient railway operators in Europe, if not the most efficient. Of course, I have only scratched the surface of what actually went on within BR here, and its story in the period wasn’t one of unabated progress. Yet, this data shows that claims by Steven Norris (and others) that BR was inefficient in the 1990s are just plain wrong. Indeed, if privatisation hadn't happened there is no telling how efficient or productive Britain's railways may have become after 1997.

If you would like to read more about BR's business, I would really recommend Terry Gourvish's book. 

[1] Gourvish, Terry, British Rail 1974-97: From Integration to Privatisation, (Oxford, 2004), p.455-456