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INFORMED SOURCES September 2001

MANIFESTO – creation of a functioning railway

1. Received wisdom is that restructuring the privatised would be so disruptive as to be counter productive. This can be summarised as the ‘we are where we are' school of thought. In his Sir Robert Reid Memorial Lecture in February (Modern Railways March 2001) Virgin Trains Chief Executive Chris Green went as far it was then considered prudent in his proposed evolutionary approach. This would see a reduction in the number of Railtrack Zones, which would then become alliances with the maintenance contractors. Each alliance would then be joined by the train operating companies in the Zone to form Group Boards.
2. Since then, the situation facing the railway has changed and continues to deteriorate. Performance has failed to recover from the post Hatfield disruption, Railtrack first withdrew from long term investment commitments, then claimed that the revenue made available in the Control Period which began on 1 April this year was insufficient to cover maintenance and renewal costs over the next five years. Additional funding had already been made available to cover the cost inflation on the West Coast Route Modernisation.
3. Meanwhile, the Strategic Rail Authority's franchise replacement programme perpetuated the number of franchises created by the Conservative Government when the emphasis was on competition on the rails.
4. Recognising that the cost of a 20 year franchise programme was unquantifiable. Transport Secretary
5. Stephen Byers has tasked the SRA to seek quick improvements through two year franchise extensions. It is extremely unlikely that industry can generate significant improvements in this timescale which is aligned with the five year lives of both the current government and Railtrack's control period.
6. However, Byers' ruling effectively puts the passenger railway industry on hold and provides the ideal opportunity to review the current state of affairs and plan a better way forward. The mantra ‘we are where we are' works only if you are in a viable situation: this is no longer the case for Britain 's railway.
7. At the heart of the problem is the separation of wheel and rail between train operating companies and an infrastructure owner. This results in the complex contractual relationships which blight railway operation, planning and investment.
8. Proposals to bring infrastructure and trains under common management raise the objection ‘you can't hand over the infrastructure to train operating companies. This is a valid objection. As currently constitued TOCs are totally artificial constructs set up to run franchises. They own no assets and take over the existing staff with the franchise. In the five years since the first franchises were awarded, TOCs have, almost without exception, failed to introduce new management blood successfully. The way forward does not lie with the TOCs.
9. Rather we must recreate what privatisation destroyed, a functioning, integrated railway.
10. First, the railway infrastructure, but not its operation, must be taken back into state ownership. The infrastructure is a national asset and must be treated as such. It does not work as a private sector business.
11. Second, the SRA, or its equivalent, takes over responsibility for the specification and production of the national timetable. When Virgin Cross Country requires 79 iterations to date to develop its new regular interval timetable, the current fragmented system is clearly incompetent.
12. This combination would allow the Government to offer management contracts to run a vertically integrated railway. Contracts would be for set terms, with options to extend. Performance targets would be set for punctuality, reliability, overcrowding and so on with year on year continuous improvements and a bonus/penalty regime.
13. New joint venture companies would be set up to bid for these management contracts. To avoid confusion with the previous structure, the working title is ‘Railway Companies'. A Railway Company would lease the infrastructure from government, probably for a nominal sum, then operate passenger services and maintain and enhance (where required) the infrastructure as a vertically integrated railway.
14. Given the weakness of the present franchise owners new players would have to be brought into the industry. A Railway Company JV could include one of the logistics multinationals partnered by an infrastructure maintenance organisation, a project management group and, possibly, either a Rolling Stock Company or a train manufacturer/total train service provider. As with the current franchising model, the Railway Company would take over, and reintegrate the staff who actually run the day to day railway.
15. Financially, the Government would have to specify a minimum net worth for a Railway Company. It would have to have significant equity in the business on which a return could be earned. If it could not raise equity the business plan would be flawed indicating that the structure was wrong.
16. A Railway Company would remove many of the interface issues which bedevil the railway today. Except for through running by third parties, the compensation and possessions regimes and delay attribution would be redundant. As would the bulk of the track access regime would be redundant. Maintenance, renewal and quality of track would be a whole company issue.
17. Safety Regulation in the railway is likely to be restructured by Lord Cullen. The Railway Company would have an integrated safety case and the Railway Companies would represent a simpler regulatory task compared with seven Railtrack Zones and 25 franchises.
18. A Railway Company would also have the size needed to recruit, train and retain ‘total railway' managers to start replacing those who have left in large numbers over the last decade.
19. Access for freight is a critical issue. With a national timetable, freight paths would be guaranteed and revalidated with each timetable change. Alternatively, freight could be part of the Railway Company.
20. The Railway Company concept is a perfect fit for East Anglia and ScotRail. It also works for the classic ‘Great Western' network, including the components of the artifical ‘ Wessex ' franchise. Wales , while handicapped by the lack of a North-South route in the principality is a political given. South of the Thames , the legacy of an interoperable rolling stock fleet has already been squandered. Three independent franchises cannot provide the seamless inner London ‘metro' service needed to compensate for the lack of the Tube. A return to one railway company for the south of England is a desirable aim.
21. This leaves three challenges: the Passenger Transport Executives, the rural inter-urban service and the North South InterCity corridors. With devolution for the English Regions on the political agenda the the SRA's amorphous ‘Northern Franchise' would be no easier to create than a northern Railway Company serving the great cities. While the urban and inter-urban services would be the core of this Railway Company, longer distance services, the old Regional Railways ‘sprinter' routes could also be included or run by subsidiaries.
22. By far the most difficult task is to create a Railway Company to take forward the North-South InterCity routes and Cross Country. It can be argued that the East and West Coast main lines have unique requirements in terms of speed, track and signalling and investment. But would an East Coast Railway Company, including what is now Great Northern, have the financial critical mass? Having re-established vertical integration, should the aim be horizontally integrated Railway Companies, for example one company incorporating what are now the East and West Coast, Cross Country and Midland Main Lines? .
23. This manifesto outlines a way forward from the mess we are in. It is meant to start a debate. Saying ‘it won't work' is not an option because the present system doesn't work either. Nor is ‘nationalisation' because there is no going concern to nationalise. Within these parameters it is over to you, the readers.

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