Leading article

This is no way to run a railway

17 August 2013

9:00 AM

17 August 2013

9:00 AM

We would not want to return to the days when the transport secretary was actively engaged in the running of the railways, down to what the last wheel-tapper was paid. Nevertheless, Patrick McLoughlin’s answer when invited to condemn the £5 million bonuses which could be on offer to Network Rail directors over the next three years is a depressing comment on everything that is wrong with the railway industry. ‘It is not something I have interfered with because it is a private company,’ he said.

Network Rail is a private company of sorts, but it is one which is 100 per cent owned by the taxpayer. If the Transport Secretary is not prepared to speak up on behalf of its 60 million shareholders, then who is? The company exists in a kind of limbo, free from accountability and responsibility. It need fear neither the wrath of Mr McLoughlin nor of its customers, who have no choice in whether to use its services because there is no competition. If you want to take a mainline train in Britain, like it or lump it, you are going to have to hand over money, indirectly, to Network Rail.

Nor, with the exception of a few towns fortunate enough to be served by more than one line, do passengers have any choice when it comes to choosing their train operating company. This goes a long way to explaining why commuters next January will face average fare rises of 4.1 per cent, with some fares rising by 9 per cent — and this for a service which will in many cases involve week after week of delays and overcrowding.

The experience of the rail industry in the nearly two decades since privatisation proves something which should have been obvious: private monopolies are no better than state-owned ones. No one should mourn British Rail: it was a turgid organisation, devoid of initiative and beset by bolshy industrial relations. Its managers ran it with one intent: to manage its decline. Passenger numbers fell steadily until the point of privatisation — when, in an early spurt of businesslike -thinking, rail companies began to come up with ways to attract passengers rather than simply cope with them.


But that early entrepreneurial spirit has not been sustained. Fares have been hiked up by rail companies which enjoy localised monopolies, and a brief flurry of new services appearing has come to an end. The only time the companies have to compete with one another is once every few years, when their franchises come up for renewal. But even then they do not need to sell themselves to the wider public — only to a team of civil servants. Fares are determined not by market forces but by negotiation with bureaucrats (in the case of regulated season tickets and saver tickets) or by how cheekily they believe they can exploit their monopolies (in the case of unregulated ordinary tickets).

There is no need for the rail industry to exist without competition. Last year two companies, First and Virgin Trains, fought bitterly for the right to run trains on the West Coast Main Line. The battle ended in recriminations and remains unresolved. But is there not a simple solution: to allow both companies to operate trains along the route, forcing them to compete with each other?

As for Network Rail, putting the entire rail network into the hands of one company which seems to be accountable to nobody makes no sense. If rail lines cannot be divided in such a way that obliges the operators of different lines to compete for business, then they should be owned by a public body which is accountable to the Transport Secretary, and for which he cannot escape responsibility.

For nation or party

Public spiritedness is awfully quaint these days. On Tuesday, reporters were mystified by the news that the late Ms Joan L.B. Edwards, a woman with no known interest in politics, had left £519, 000 to ‘whoever was the party of government of the day’.

In a time when everybody is either apathetic about politics or partisan, the thought that an old lady might want to support the governing party of the day seems crazy to modern commentators. The next day, a newspaper claimed that Ms Edwards’s will had in fact asked that her estate be given to the ‘government of the day’ and that coalition politicians had ‘pocketed’ the funds. Others said that her solicitors must have made a mistake.

As The Spectator went to press, the row over Ms Edwards’s money was still raging. It says something about the state of public debate that a generous and patriotic act has been met with first astonishment, then controversy; a gift that was supposed to benefit the government has instead been used to abuse it. Perhaps Ms Edwards wanted to support the nation, perhaps she really did want to support the party in power when she died — it’s a matter of interpretation.

What’s certain is that Ms Edwards wasn’t after influence or ermine. She just wanted to help. But it’s sad that, even if her half-million pounds ended up in the public purse, it would be eaten up by the public debt in less than three minutes. So RIP, Ms Edwards. Your generosity may be wasted, but it should not be forgotten.

Got something to add? Join the discussion and comment below.


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  • Robert Taggart

    BR PLC – the solution – with Chris Green as Chairman.

  • dalai guevara

    Three independent nations.
    Three independent high speed rail tracks.
    Three forms of direct or indirect public ownership.

    Just choose one, replicate it here and be done with it.

    Who would worry such a thing would turn us into French, Germans or even make us Spanish? Surely only those who run a privatised space program on the back of the taxpayer.

  • Iain Hill

    The railway debate is approaching lunacy. Imagine it happening in France!

    Britain, if it is to stay together, needs a 21C mass transit system along the whole spine of the country, from London to Glasgow, and perhaps even further north. It should be built at high speed without phasing, efficiently of course but without eternal distractions of malevolent cost projections and nimbyism. Grit your teeth and do it.

    Once transport has been resolved, there will be fewer obstacles to economic and housing development throughout the UK, and the need to rebalance away from London can be tackled.

    Domestic air travel can be virtually eliminated, and more direct flights to Europe and the US encouraged, from Glasgow, Manchester and Birmingham, largely resolving the future of Heathrow. BAs decision some years ago to route all flights via London was the main component of the current disastrous situation.

    It is frustrating to watch this debate hijacked by all sorts of partisan groups, with little or no strategic grasp of mass transit needs, and the government sleepwalk through it ,, obsessed only by electoral hysteria.

  • Tipsilon

    “If rail lines cannot be divided in such a way that obliges the operators of different lines to compete for business”

    How could they? Competition on the same routes would be unattractive to potential Train Operating Companies, and as we saw with the privatisation of bus services, one company in an area would cut its fares until its competitors dropped out of the market, then jack them up. The only solution is public ownership.

    • Tom M

      I agree with the sentiment that things like the railways should be in public ownership but history, that is UK history, tells us that we are incapable of running a nationalised industry.
      A good example, I worked in the NCB in the 60s. A veritable playground for engineers. No shortage of money, the best equipment money could buy. All the training you could ever wish for, they created several generations of superbly trained technical staff. But, they couldn’t sell coal at a profit.
      I was only very small at the time the railways were nationalised after the war. But the mood was upbeat at the time. The left wing politicians had won their dream (clause 4), the unions were ecstatic (bigger and more powerful), the staff were elated (wages were bound to go up because the filthy profits will now be divided up between the workers), the engineers jumped up and down (now they had four trains sets to play with). It took a long time to realise the truth and all these aspirations slowly dissolved. The railways were no better under nationalisation than they were in private hands except that the losses were now paid for by the taxpayer.

      • Tipsilon

        But the taxpayer is still bearing the cost. We subsidise the railways with billions of pounds a year (not including the many more billions spent on track replacement after the Hatfield rail crash), meanwhile the Train Operating Companies either make profits from our investment which go to their execs and shareholders, or if they fear making a loss, abandon their franchise and leave us to pick up the pieces. The privatised railways are a scam perpetrated against the public. As were the privatisations of water, gas, electricity and soon, the Post Office.

        • Tom M

          So we’re both agreed then, we can’t run railways in the UK either as private companies or nationalised companies. Or for that matter even, as you describe, semi-nationalised companies.

          • Tipsilon

            I should have replied to that point before – no, I don’t agree. I don’t accept that because there were difficulties in the past that means we’re simply incapable of running things properly. It seems to me that before many advancements we now take for granted – modern medicine, the aeroplane, the motor car – there were many failures, and even now we still work to make these things better. The people who succeed keep on trying and refining their ideas until they get it right – and then they keep working.

            We need railways. Towns and cities are often congested already and the financial, health, social and environmental costs of trying to replace railways with more roads would be unbearable. The question, then, is whether the people subsidise the private profits of a few who benefit from an inefficient privatised system, or whether we run public transport as a public service and reinvest any ‘profits’ into the railways, also benefiting from lower borrowing costs, longer-term planning and economies of scale. I’ll take the latter.

          • Tom M

            You’re missng the point. I didn’t say we didn’t need public services I said we can’t run them. We can’t run them whether they are private or public or semi-public. It’s not a matter of technological advancement, that’s a different category of activity altogether.
            And where did you get the idea that railways could ever turn a profit? What railway anywhere in the world does this?

  • Guest

    Utter rubbish. This article completely fails to acknowledge that
    passenger numbers on the inter-city lines more than doubled during the
    1980s. The Inter-City brand was immensely successful, even copied by
    Deutsche Bahn with its ICE service. Its famous branding, unfortunately
    fronted by the now-disgraced Jimmy Saville, ‘this is the age of the
    train’ was one of the most successful advertising campaigns of its day.

    British
    Rail was not devoid of initiative. Under Sir Peter Parker it grew
    substantially, and by 1990 had a greater number of trains and track
    miles running at 100mph+ than any other railway in Europe. If you count a
    high-speed railway as one that operates at 125mph+, Britain had more of
    it than Germany, Spain and France at British Rail’s privatisation in
    1994; only Japan had more.

    What BR did lack was
    capital, or a government that saw its worth. Its no secret that Mrs.
    Thatcher hated the railways – and public transport in general –
    contrasting it with the aspirationalism and mobility of owning a car. A
    1977 report recommending widespread upgrades and electrification of
    lines was largely ignored. Where it did take place – such as on the East
    Coast Main Line, corners were had to be cut; the overhead equipment was
    of dubious quality, and branches to Lincoln, Hull, from Leeds-York and
    further north to Aberdeen, were not included. Given the tiny amount of
    money made available for this scheme, it is amazing that BR’s
    infrastructure team managed it, yet it was delivered on-time and
    on-budget. Compare this with privatised Railtrack’s upgrade to the West
    Coast Main Line, which had to be scaled back and was 300% over budget.

    BR
    was not an inefficient organisation when privatised – it was the most
    efficient nationalised rail network in Europe. In 1995/6, it received a
    net subsidy of £1bn. Since the early 2000s the privatised network’s
    subsidy has not been below £3bn, and has exceeded £5bn in some years.
    Why? Fragmentation. 11p out of every £1 spent as part of your ticket
    goes to the ROSCOs (Rolling Stock Leasing Companies), most of whom are
    owned by the banks, and which are effectively licences to print money.
    Much of the rolling stock they lease -BR vintage- costs them nothing,
    since the construction cost was written off by the taxpayer under BR.
    And future rolling stock purchases are backed by taxpayer funded finance
    schemes, such as that for the IEP trains and Thameslink. Nationalise
    the railway tomorrow, and an 11% cost saving could be made.

    Furthermore,
    Network Rail’s debt is currently at £30bn, one figure that George
    Osborne doesn’t include in his figures for the national debt. British
    Rail, as a nationalised industry, wasn’t allowed to have any debt at
    all! So you have to ask yourself, why was it privatised? Pure ideology. A
    belief that private is always better. Yet railways are natural
    monopolies. Duplicate lines, originally built by private companies in
    speculative booms, were closed under Dr. Beeching in a less enlightened
    age. If you want to get from London-Liverpool, there is one operator and
    one track. This is why Thatcher was dead against the Adam Smith
    Institute’s proposal, when it emerged, to privatise BR (at first).
    Unlike the privatisations of BT, BA and British Steel, the railway was
    not a natural marketplace. The privatisation was instead driven by an
    almost obsessive hatred of nationalised industry – even one that worked –
    and unionised labour.

    When the railway was privatised,
    around 75% of the population were against the policy. This has risen to
    around 80%, in recent polls, who want it returned to public ownership.
    For the privatisation of Royal Mail, the figure is around 65%.
    Privatisation therefore demonstrates something else – the democracy
    deficit that exists in Britain. Any sensible government of the future
    should take heed of hard-pressed commuters and consider bringing both
    Network Rail and the franchises fully under the control of the state. A
    season ticket from London-Kings Lynn is pushing through £5,000 – more
    than one for the entire national network in Germany’ THIS is no way to run a railway!

  • Cynical_Man

    Utter rubbish. This article completely fails to acknowledge that
    passenger numbers on the inter-city lines more than doubled during the
    1980s. The Inter-City brand was immensely successful, even copied by
    Deutsche Bahn with its ICE service. Its famous branding, unfortunately
    fronted by the now-disgraced Jimmy Saville, ‘this is the age of the
    train’ was one of the most successful advertising campaigns of its day. Passenger growth has continued since privatisation, but despite it not because of it. The rising cost of driving and the ability to use smartphones, ipods and access the internet on trains has more been to do with it.

    British Rail was not devoid of initiative. Under Sir Peter Parker it grew
    substantially, and by 1990 had a greater number of trains and track
    miles running at 100mph+ than any other railway in Europe. If you count a
    high-speed railway as one that operates at 125mph+, Britain had more of
    it than Germany, Spain and France at British Rail’s privatisation in
    1994; only Japan had more.

    What BR did lack was capital, or a government that saw its worth. Its no secret that Mrs. Thatcher hated the railways – and public transport in general –
    contrasting it with the aspirationalism and mobility of owning a car. A
    1977 report recommending widespread upgrades and electrification of
    lines was largely ignored. Where it did take place – such as on the East
    Coast Main Line, corners were had to be cut; the overhead equipment was
    of dubious quality, and branches to Lincoln, Hull, from Leeds-York and
    further north to Aberdeen, were not included. Given the tiny amount of
    money made available for this scheme, it is amazing that BR’s
    infrastructure team managed it, yet it was delivered on-time and
    on-budget. Compare this with privatised Railtrack’s upgrade to the West
    Coast Main Line, which had to be scaled back and was 300% over budget.

    BR was not an inefficient organisation when privatised – it was the most
    efficient nationalised rail network in Europe. In 1995/6, it received a
    net subsidy of £1bn. Since the early 2000s the privatised network’s
    subsidy has not been below £3bn, and has exceeded £5bn in some years.
    Why? Fragmentation. 11p out of every £1 spent as part of your ticket
    goes to the ROSCOs (Rolling Stock Leasing Companies), most of whom are
    owned by the banks, and which are effectively licences to print money.
    Much of the rolling stock they lease -BR vintage- costs them nothing,
    since the construction cost was written off by the taxpayer under BR.
    And future rolling stock purchases are backed by taxpayer funded finance
    schemes, such as that for the IEP trains and Thameslink. Nationalise
    the railway tomorrow, and an 11% cost saving could be made.

    Furthermore, Network Rail’s debt is currently at £30bn, one figure that George
    Osborne doesn’t include in his figures for the national debt. British
    Rail, as a nationalised industry, wasn’t allowed to have any debt at
    all! So you have to ask yourself, why was it privatised? Pure ideology. A
    belief that private is always better. Yet railways are natural
    monopolies. Duplicate lines, originally built by private companies in
    speculative booms, were closed under Dr. Beeching in a less enlightened
    age. If you want to get from London-Liverpool, there is one operator and
    one track. This is why Thatcher was dead against the Adam Smith
    Institute’s proposal, when it emerged, to privatise BR (at first).
    Unlike the privatisations of BT, BA and British Steel, the railway was
    not a natural marketplace. The privatisation was instead driven by an
    almost obsessive hatred of nationalised industry – even one that worked –
    and unionised labour.

    When the railway was privatised, around 75% of the population were against the policy. This has risen to around 80%, in recent polls, who want it returned to public ownership. For the privatisation of Royal Mail, the figure is around 65%.
    Privatisation therefore demonstrates something else – the democracy
    deficit that exists in Britain. Any sensible government of the future
    should take heed of hard-pressed commuters and consider bringing both
    Network Rail and the franchises fully under the control of the state. A
    season ticket from London-Kings Lynn is pushing through £5,000 – more
    than one for the entire national network in Germany’ THIS is no way to run a railway!

    • Fergus Pickering

      The railways were privatised to break the power of the unions. Which they did. Anybody travelling by rail in the 1970s knows what the unions did to the service.Itwas intermittent, dirty and slow.

  • marksl

    What ‘Cynical Man’ writes below (posted twice) is absolutely correct. The improvements made to Britain’s railways from the time that Sir Peter Parker became chairman (1976) to the end of BR and winding up of InterCity (March 1994) were remarkable. The biggest single personality who created the effective BR that was affordable and not a drain on the taxpayer was Sir Robert Reid (Reid I), Chief Executive 1980-83 and Chairman & Chief Executive 1983-1990.
    I was a member of a regional statutory Users’s Committee in those years and can confirm that the improvements made in the 1980s were remarkable.
    If we could have the BR of 1990 back, plus the technical and quality improvements that would inevitably have been made in the last 20 years whatever the structure of the railway, the country would be far better off – a much better railway, better run, lower prices, and lower call on the taxpayer, than we have with privatisation and fragmentation.
    For comparison, don’t look at France but at Germany, Switzerland, and most recently Austria, for how to modernise and offer a fair price to travellers which keeping the railway broadly in public ownership and vertically integrated.

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