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.

Potters Bar Accident Charges Come too late to make Real Changes Happen

Buried amongst other news stories yesterday was the news that two companies would be prosecuted over the 2002 Potters Bar rail accident. On the 10^th May 2002, at 12.58, the West Anglia Great Northern northbound train, which was travelling at high speed, derailed just outside Potters Bar station. The train passed over a faulty set of points which failed, causing the rear set of wheels to travel onto a parallel line. The train then flipped over and came to rest wedged between the platform and the building structures. Seven people lost their lives and another 76 were injured.

The accident was caused by a collection of maintenance errors. The Health and Safety Executive’s report of May 2003 stated that blots that held one of the points’ stretcher bars in place were either missing or loose. This was despite a full inspection of the points being undertaken on the 1^st of May, as well as a visual check having been carried out on the 8^th. Indeed, even when on the 9^th of May a railway worker travelling on the line reported ‘lethal vibrations,’ poor communication meant that an inspection was conducted on a set of points at the wrong end of the platform. Thus, they did not find the loose bolts.

You may have noticed that I have left out the names of the companies that are being prosecuted. In 2005 the Office of Rail Regulation (ORR) decided, on the basis that there was a lack of evidence, not to prosecute two companies responsible for maintaining that section of track in 2002. These companies were Railtrack, who had overall control of maintenance on Britain’s railways, and Jarvis, their subcontractors who were responsible for the section of track in which the accident occurred. However, with the recent conclusion of the inquest into the crash. Ian Prosser, the ORR’s director of safety, now feels in a position to proceed with a prosecution. But, there is a slight problem; neither Railtrack, nor Jarvis, exists anymore. Indeed, the prosecution is proceeding against Network Rail (NR), who took over maintenance of Britain’s rail network from Railtrack, and Jarvis’ administrators, as the company is now in administration

Railtrack was a private company, but one that was very poorly run. After mounting debts and government bailouts, in October 2001 it went into administration. Yet, in May 2002 it was still maintaining the network and the government, while supporting its operations, were investigating ways for it to get out of administration. However, despite all efforts Network Rail took over Railtrack’s assets in October 2002. But with this transfer of infrastructure NR also assumed Railtrack’s legal responsibilities, which now makes it culpable for the Potters Bar accident.

Additionally, Jarvis, an infrastructure subcontractor of Railtrack in 2002, is now in administration and has ceased functioning. Network Rail over the last 8 years has brought much of its maintenance operations in-house and thus, combined with their culpability in the Potter’s Bar accident, much of Jarvis’ decline was because of losing contracts on Britain’s rail network. In addition, and in an effort to generate business, Jarvis also over-extended itself financially in the mid-2000s to the point where its debts were insurmountable. Subsequently, it was placed in administration earlier this year.

Therefore, while the families of those who died in the accident are happy that a prosecution has been brought, it is, sadly, far too late to charge those who were truly responsible. As Louise Christian, the families’ solicitor at the inquest stated, "[a prosecution] has taken place eight and a half years after the event. However, the prosecution is being taken against a company which is in administration and another not for profit company, which is owned by the Government, so the extent to which it can produce accountability may be limited." Indeed, as Network Rail have correctly stated, it is an unrecognisable company from the one they took over eight years ago.

Therefore, I believe that this prosecution comes far too late to make any substantive difference to the standards of infrastructure maintenance on the British railway network. The recently concluded inquest into the Potters Bar accident, rather worryingly, stated that a similar accident could happen soon. However, that is a matter for NR currently and the evidence in the court case will almost certainly focus on the maintenance and procedures Railtrack and Jarvis were operating in May 2002. It will, therefore, not address the way NR currently maintains Britain’s railway infrastructure. The only positive thing that may come out the court case is to further define the line between what constitutes ‘good’ and ‘bad’ maintenance procedures; and any extra definition of that is always welcome.

What will happen on the railways in the next 5 years...some musings

Ah, so all the budgets of all government departments are going to be cut by 25%. Well, all the budgets except the ministry of health and international development. This is therefore going to be a scary time for the railway industry, especially as they take up the majority of the Department for Transport's (DfT) expenditure. I honestly, do not think that any idea, project or whim will escape the axeman's wrath. Nor do I think that the existing rail network will be immune. In short, start screaming now. I will now attempt to rationalise what is going to happen, or at least may happen.

1.Firstly, those projects which have already been stopped won't have any chance of being restarted soon. Even under the previous Labour Government some things had been kicked out of the park. For example, the Intercity Express Project, that was designed to replace Britain's ageing HSTs and Intercity 225s, was put on hold by Lord Adonis. But the new Government has already cut schemes such as Network Rail's 'Better Stations Project' that was going to improve some of Britain's most passenger-unfriendly stations. Lastly, as I discussed in an earlier Blog post, over 700 new carriages are not going to appear. The overall theme therefore is that comfort on rail journeys is not an important thing in the new era of fiscal tightening. You are going to be squeezed, pushed and jostled on your journey. In a way I don't mind so much, I have to say I expected this. Is comfort really the most necessary thing when everyone in the country is having to pitch in to reclaim the debt? In truth, I don't thinks so, but I just really wish it wasn't happening.

2.The raising of fares will also be on the agenda...naturally. While I think a lot of people will jump to blame the new government, but then I'm not unfair. I should point out that increasing the price of tickets actually was on the cards under Labour. They wanted to reduce the amount of money that they paid to the Train Operating Companies (TOC), who in turn would have to put up the train fares to make up the funding shortfall. My only concern now is that with the DfT turning increasingly pro-road under Philip Hammond, they will allow a much more fervent rise in fares that may price people out of rail travel even further. This, however, in a way makes sense, especially given what I said above. If there is less space on the trains, a few less passengers would probably make my journey less stressful. This said, I'm not happy about it. Nothing should ever be done to discourage the public to use the trains.

3.So what of the big capital projects. Well, of course there is Britain's second High Speed Line (HS2), which was to link London with Birmingham, Manchester and Leeds through new whizzy trains. I have to be honest, I don't think this'll happen. Firstly, it's just WAY WAY WAY too expensive. Simple. But more to the point, with the cost being roughly £34 billion, and with a 25% cut in the amount of money available to the DfT, I am convinced that that the cash will be needed to maintain the existing network. Further, when I think of the way that the project was talked about before the election, in that the issue was sustained by the fact that no party wanted to pull their support for it, I think that the government will realise that that it was a political marketing stunt and as such it will loose its importance. With the new coalition, I suspect, it will get quietly dropped. On top of this, I suspect that the electrification of the Great Western Main Line will be dropped...again quietly. All in all I feel the message for the railway industry in the next 5 years will be to make the best out of the country's existing infrastructure.

4.Lastly, I think that the government will be much more cautious about renewing franchise agreements. On the 18th June the DfT put all franchise renewals on hold and extended the length of time that the East Coast franchise would remain in public hands. Some part of me thinks that this move is a precedent and that the DfT has seen that renationalising franchises by stealth is the cheaper option. My hope is that over the next 20 years privatisation will fizzle out. Yea, this is whimsy. There's no chance. I just think they will take more time to formulate what they want from the franchise agreements, and then make them longer. This hasn't really been a bad thing, the Chiltern franchise, that is 20 years in duration, has been one of the consistently the best performing. Thus, I think that longer franchise agreements may actually be good for the traveller and will deliver better services. However, it may also mean that the DfT restricts the amount of money they put into the franchises and force the TOCs to put up fares and reduce the quality of the travelling experience. I think in the new anti-rail era, the latter is more likley.

For all my speculation what will actually happen is a mystery. However, if the railways are going to be cut in such a horrific way one thing does need to happen that I don't think has happened in a long time. The government, DfT and all involved need to ask themselves one crucial question...what do we want our railways to do? Yes...we need a strategy. At the moment they are simply being looked on as an expense, a position that I think that will become more prevalent under the Conservative government. The railways to state their purpose, to define their role within the nation, within the economy and within the public's lives. If we know what the railways are for, if we have a clear-sighted goal, then all those involved can work towards making it (whatever it is) a reality. At the moment the TOC's, NR, the DfT, simply do their job without any purpose. They spend their time fighting, maintaining the status quo and not really affecting real change. What we need is a concerted effort to make Britain's railways the best they can be, for everyone who lives here so that we can survive the cuts to come.

Goodbye Mr Coucher, you won't be missed

This week something shocking and unexpected occurred in the rail industry. After three years in the job, Iain Coucher, (shown) the Chief Executive of Network Rail (NR), who own and maintain Britain's rail network on the taxpayer's dime, stepped down. He won't be going immediately. He'll stay in place to help choose his successor. Now of course everyone had differing opinions on Coucher and his legacy.

Bob Crow of the RMT predictably stated that this was an exceedingly good thing. “As far as we are concerned it's good riddance to Iain Coucher,” said Crow, "He has presided over a culture at Network Rail that has attacked jobs, working conditions and rail safety while his salary and perks have gone through the roof." On the other side of the fence was Anthony Smith, the head of Passenger Focus, who praised what Mr Coucher's had done for the humble passenger, "Britain's rail passengers will thank Iain Coucher for what he has achieved at Network Rail. His relentless attention to getting more trains on time... has helped underpin the gradual rise in rail passenger satisfaction over the last few years." This was reiterated by a number of voices in the industry such as, Bill Emery, the head of the Office of Rail Regulation (ORR), who regulate NR, who said that Coucher had "major contribution to our improving mainline railway.”

With the first two individuals it is easy to understand why they made their comments. Bob Crow quite understandably attacked those aspects of Coucher's leadership that he perceived as affecting his union members' interests. Coucher clearly was on a weighty pay packet. Even though he waived his £150,000 bonus last year, he still received from a 'management incentive scheme' £150,000 on top of his £600,000 per year salary. This, so I am told by the papers, is four times the Prime Minister's pay packet. Therefore, while jobs amongst NR 35,000 workers are on the line, NR had Britain's highest paid public 'servant.' Indeed, Coucher was reported in The Times as having said that he would, '...refuse to take a pay cut and that he is worth every penny of his £613,000 salary.” This arrogant attitude betrays in part the culture within NR's higher echelons and even though Coucher waved his bonus last year, his management team did not. Crow's other comment does, sadly, hit the nail as three NR workers died this year. Indeed, the ORR did issue five prohibition notices and 21 improvements notices about safety. As such, as Ian Prosser, the ORR's safety director, said no one in NR's management should receive a bonus. Therefore, Bob, for once we are in agreement, this man did get paid far too much.

On the other side of the fence there is Passenger Focus. OK, this is QUANGO. Basically their role is to stick up for you, me and us, as passengers. They are always the ones that come out and complain about fare rises, they also measure passenger satisfaction. You see, they are one of last government's favourite kinds of QUANGO. It looks good, but is utterly useless. Anyhow, they are happy because Iain has made the passengers happy – simple.

It was Bill Emery's comment that was the most interesting as Iain, I'm sure, doesn't like Bill. On the 30^th April Bill wrote a nice letter to NR regarding the performance of the company this year. He described NR's year as 'mixed'. He was complementary about passenger safety and the performance of the railways generally. Basically, because of NR ,as a passenger you are safe and on time. But, Bill also stated that the ORR was still concerned with the “Lack of progress with some regulated performance requirements, your asset management competence and the weakness in timetable planning, all set in the context of there being three worker and contractor fatalities during the year.” Overall he said that, “we are disappointed that it has too often been the case that...you only make progress when we press you to do so.” Shocking really isn't it. Under Coucher NR isn't really doing its job, and as such the ORR needs to occasionally take out the poker to do make it operate effectively. This, therefore, is a problem that can only be laid at his door.

Then the next thing happened after this damning letter, was that NR published its accounts on the very next day...oh dear. Coucher revealed that revenue was down from 6.16 million to 5.69, principally due to the ORR cutting rail and freight operator's track access charges so as to force NR to make efficiencies. In addition the ORR reported that NR overspent by £149 million or 17% of its budget. As such the report showed that, NR spends too much and is receiving less money from the train operators. On top of this, with the financial crisis about to hit it hard, NR will be receiving less money from central government. This therefore a worrying time for NR, but more so for us as we fund it.

The problem with the mass-media coverage of the entire NR/Coucher resignation story is that very few sources focussed on the crux of the issue. Very sad as they were, the three worker deaths should not have been the main talking points. Indeed, their mention was usually tagged onto mention of Bob Crow's comments about safety. Further to this, every newspaper, website or journal focussed on the bonuses far too much and in a sensationalist manner. This is because we are in an age when the bonus as a concept in business is being attacked. While it is important to scrutinise bonuses, they are in reality a drop in the ocean, in NR's monetary terms and should not have received that much coverage. In my opinion, there was one gaping hole in the coverage of the story.

The coverage failed to talk about what happened to NR's finances and management under Coucher's leadership, which in my opinion was the most important issue as we pay for it. Therefore, very little commentary stated that NR uses money like liquid gold, a symptom of its corporate governance being, as described in the comments by the ORR, shockingly bad. Firstly, a recent regulatory review found that in comparison with European railways, NR is between 30 and 50 percent less efficient in spending on maintenance and track renewal. Bill Emery has said that “it's very clear that the railway industry [in Britain] does not stand good scrutiny with its peers on costs.” NR did claim that under a new 5 year cost reduction plan they were reduced by 7%, or 86 million, in 2009-10. However, this isn't reality and all that happened was that a number of projects were postponed meaning that infrastructure projects will just build up in a back-log.

Further, by NR's own measures, it stated that it had improved efficiency by 4.9%. However, this was instantly and comprehensively dismissed by the ORR, who said that in reality efficiency had 'gone backwards' in both operational efficiency and maintenance terms by 2.5%. Indeed, if things keep going like this the ORR has said that NR's debts would bankrupt the industry (yes you heard me, that's Britain's entire industry) by 2020. Its debts stand at the moment at 23.8 billion, and hence why I said that bonuses, while important to look at, are a drop in the ocean. Overall, NR's corporate governance is clearly in a mess and costing the taxpayer dearly. Therefore, the blame can only be laid at Coucher's door.

With mounting pressure and scrutiny, I therefore feel that Coucher's resignation shouldn't have been that surprising. But, I ain't complaining. I think it is good that Coucher has gone because at the end of the day, while he has been at the company since it was formed in 2002, he has overseen a period when NR's spending was unacceptably high by every measure concocted. The problem with Coucher's appointment three years ago was that he was simply promoted from being deputy Chief Executive, and subsequently didn't bring new ideas or a fresh pair of eyes to the job. Thus, he clearly allowed the continuation of inefficient working practices, mismanagement and cost inefficiencies that had been developed in the five years before hand under his predecessor John Armitt. Crucially, he didn't make the changes necessary to improve NR's corporate governance, and was, therefore, clearly the wrong man for the job. In the era of fiscal responsibility, what is needed at NR now is a new Chief Executive that is, a) not appointed by anyone in NR, b) has the ability and the knowledge to assess NR's costs and make efficiency improvements, and c) has the strength to sake the management of the company out of its complacency. These qualities are vital so that the taxpayer's money isn't wasted.