If You Want Low Fares, Grasp the Nettle - Criticising the Railway Critics

Inevitably, passenger and railway advocacy groups criticised the fare rises that hit us yesterday. In the wake of this, the Chief Executive of the Association of Train Operating Companies (ATOC), Michael Roberts, went on BBC news and gave a very good interview in which he provided sensible responses to sensible questions about why the increases were occurring.[1] I have to be honest, I was quite impressed. Here was a man who knew about how Britain’s railways were funded, the structure of the industry and the problems that it faced basically telling at as it as he saw it. Now, I am not saying that I agree with the increase in ticket prices, in fact I worry profusely about the effect they may have on rail usage generally. But in reality, what are the other options to raising fares when the government's subsidy for railways is about be massively cut?

Of course, there are always alternative options to such large fare rises. I am not an industry insider, nor am I someone who fully understands the ins and outs of the modern railway network. All I can really say is that I am a railway historian who has developed a slight grasp on the vagaries of the modern British railway industry. Therefore, I would not be able to give a fully informed opinion on how to reduce the fares or change the funding model through a re-adjustment of the structures of the industry, railway company management, cost structures or operating procedures. But then again neither does anyone else, including many critics of the price rises.

Every time that the fares go up Passenger Focus (PF), a body which are supposed to defend the rights of railway passengers, say the same things. Firstly, they inform us that British passengers already pay the highest fares in Europe. Secondly, they assume that the commuters will be dumb-struck, or, as they said this year, ‘baffled’ by the fare increases. Of course commuters aren’t baffled, they know greed when they see it. Thirdly, we are always told that some companies have put fares up above the average.[2] Then, they do the traditional thing of supplying to news outlets a lovely table which details the highest percentage price increases on certain season tickets. While all these facts are true, it isn’t like we didn’t know them already. Realistically, PF are just repeating complaints heard on every platform around the country.

Furthermore, on the 31^st December the Campaign for Better Transport (CFBT) went wild and launched a new campaign called ‘Fair Fares Now,’ which seeks to achieve ‘cheaper, simpler, fairer train fares.’ Ideally, their goal is to do this before the ticket pricing rules change in 2012, after which Train Operating Companies (TOC) will be able to put up regulated fares by the percentage of the Retail Price Index plus 3 per cent (it is now RPI+1%). However, is this really different to PF’s complaints? The answer has to be no. The CFBT are also saying what they have said before and what everyone knows; that high train fairs are not smart, not green, and definitely not fair.[3]

With such tired old scripts and with only one issue on their agendas, is it surprising that these organisations have changed nothing? They do not make headway because they do not engage with the structure of the industry. The railway industry is a huge web of contracts, managers, technologies, structures, organisations, companies and, of course, financial transactions. For PF and the CFBT to only talk about the fares, when essentially pricing is one out of a raft of industry issues, is very short-sighted. Essentially, they are criticising an aspect of the rail industry that the TOCs and the Department for Transport know they are going to get criticised for and which for the last 13 years have acted on irrespective of outside input. What PF and CFBT should do is take a leaf out of the book of high-profile critics of the pre-World War One railway network, William Acworth and George Paish.

Both men were very vocal critics of the railways in their day and criticised not only the rates that they charged for their services, but also the way that the companies ran their businesses. For example, in his 1891 book The Railways and the Traders: A Sketch of the Railway Rates Question, Acworth had chapters entitled ‘Cost of Carriage,’ ‘Equal Mileage Rates,’ ‘What the Traffic Will Bear,’ ‘What the Traffic Will Not Bear,’ ‘Who Shall Fix the Rate?,’ ‘Some Extortionate Rates,’ ‘Competition and Combination,’ ‘Continental Rates,’ ‘American Rates,’ ‘Why English Rates are High,’ ‘The Traders Demands,’ and ‘The Board of Trade Provisional Orders.'[4] Further, in 1902 Paish wrote a book called The British Railway Position, in which he criticised British railway management on matters of train loading, costing, operation and capacity.[5]

What separated these men from the current critics of the railway network was that they had detailed knowledge of how the industry worked, how the companies operated and how much the railways cost to run. Armed with this information, they were able to make stinging criticisms of the railway companies and caused their senior managers and directors feel very uncomfortable indeed. But this was not their only success. Because of the knowledge they possessed Acworth and Paish began to influence government thinking. Subsequently, their insight led to them both being asked on different occasions to sit on Parliamentary committees investigating railway management and pricing.

Subsequently, their criticism was successful in helping changing the way that railway companies interacted with the public and shareholders. Between 1890 and 1914 Governments legislated to freeze the rates that were charged by railway companies, determine what operating statistics they collected and specified how their yearly accounts were presented. Indeed, some of these changes were the result of committees that Acworth and Paish sat on. While the merits and failures of these policies can be debated, Paish, Acworth, and others used their detailed knowledge of the industry help force the railway companies to bend to the will of the state and the people.

Thus, what we as passengers need is not for PF and the CFBT to complain about just the fares, as every passenger will already be doing that and historically the evidence suggests that it doesn't change anything. Their role should be to analyse and criticise the structure of the industry, the way that it is subsidised, and how the companies operate. Their role should be to provide a counter narrative to the one peddled by ATOC and the DfT that actually presents alternatives to current industry policies and structures. They should be trying to make the currently comfortable railway managers and transport ministers feel very uncomfortable in their offices by questioning how they have created a system that has so blatantly failed. Only then will they begin to be listened to, gain influence and be on the road to achieving their stated goals.

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[1] http://www.bbc.co.uk/news/uk-12104087

[2] http://www.passengerfocus.org.uk/news-and-publications/press-release.asp?dsid=4831

[3] http://www.bettertransport.org.uk/campaigns/fair-fares-now

[4] Acworth, William, The Railways and the Traders, (London, 1891)

[5] Paish, George, The British Railway Position, (London, 1902)

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.