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Stephen Byers still hasn't adopted the Informed Sources manifesto in the September issue – but give him time.
While the IPPR think tank clearly persuaded the Government that giving responsibility for the national rail network to a not-for-profit trust was a good enough reason to put Railtrack PLC into administration, wreck any hope of major upgrades for the foreseeable future, and antagonise the City of London, it might have been better to wait until someone had worked out how the trust fits into an operational railway system with trains and stuff.
Policy wonks are now running around in circles in an attempt to provide a new structure which will enable Stephen Byers, Secretary of State for Transport, Local Government and the Regions to produce his promised proposals which will enable a transfer of Railtrack's responsibilities to a new private sector company ‘limited by guarantee'. This company will ‘have the interests of the travelling public as its priority, not the need to increase shareholder value'. It will invest any operating surpluses directly into the network.
Buyers vision for NuTrak
The company we propose would have responsibility for operations, maintenance and renewals. It would have a small professional Board of executive and non-executive directors. Performance targets would be set linked to levels of service, safety and value for money. A Board working on commercial lines but focused solely on delivering a safe well-maintained rail network that is fit for the 21st century. The company would be able to promote collaboration and co-operation around the wheel and track interface. The absence of which has been one of Railtrack's weaknesses. A private company limited by guarantee would need far less intense regulation. We therefore intend to streamline the existing structure whilst still recognising that there will be a continued need for some form of independent economic regulation. We shall discuss our proposals with the industry's key players. We are clear that it is important for the new structure to provide the following: • Strong strategic leadership • A cut in the burden of day-to-day interference • An end to the self-defeating system of penalties and compensation • Clearer accountability and • An end to perverse incentives The new company we will be proposing would be able to raise funds in the market. Private sector funding would operate in partnership with Government to deliver the 10-Year Plan objectives for rail. Under our proposals we intend to offer all existing lenders to Railtrack plc the opportunity to transfer over to the new company with no loss of principal or interest. Any debt transferred to the new company will be financially sound and will have, at the time of transfer, good long- and short-term credit ratings. Stephen Byers, Secretary of State for Transport, Local Government and the Regions. Statement in Parliament 15 October 2001
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Current thinking seems to see the trust, to be referred to in this and future columns as NuTrak (© Informed Sources 2001) as Railtrack-with-a-social-conscience. Byers wants the interests of the rail network operator ‘aligned with the interests of the whole industry'. This, he claims, can be achieved by simply freeing Railtrack's management from the requirement to deliver returns on publicly traded shares.
Hmm. So where is the financial spur to drive down costs and drive up efficiency if NuTrak is responsible for maintenance and renewal, is funded by Whitehall .
Apparently NuTrak's members (getting to love that catchy new name?) would include ‘key industry stakeholders' appointed ‘initially' by the SRA. This begs all sorts of questions, not least the allocation of safety responsibilities under the company's safety case and the fact that touchy feely NuTrak will be dealing with the former bus bandits who now run our trains and will be on its board.
Or not, since the TOCs are looking somewhat askance at Byers' baby and don't seem all that keen of moving outside their core competence. They are also terrified that the Government intended to take away the Rail Regulator who is the only person who might stop them being ‘Railtracked' next.
But what made BR perform you ask? Well the BR Board was appointed by Government, was given strict financial limits and could be sacked if it did not deliver or was too much of an embarrassment. And I doubt if you are going to get a visionary Chairman and ball breaking Chief Executive to run what will, in effect, be a cuddly not for profit quango.
‘This is not renationalisation, Stephen Byers 8 October 2001 |
Unlike shareholders, Byers says the members would not receive dividends or other returns and any financial surplus would be re-invested in the network. The result would be ‘a business independent of Government, operating on a fully-commercial basis' (it says here). Oh come on.
Presumably the stakeholders would include train operating companies, maintenance contractors, Rolling Stock Companies, signal manufacturers. Well, no conflicts of interest between members like these, then.
When the Trust is set up both the Railtrack PLC business and the debt of its finance creditors, who are ALSO very cross at the way the Government is treating them, would be transferred to NuTrak, which would then operate the post administration railway. NuTrak would be ‘financially sound' and the Government would ensure, presumably without any guarantees on the Chancellor's budget, that it had the credit ratings needed to attract investment in the railway.
So Byers' current thinking is that we retain the Conservatives' privatisation structure but because Nutrak hasn't got any shareholders, all the treacle, things like performance regimes, TOC on TOC delay minutes, possessions allowances and so on, will vanish in the generally cuddlyness. If so he is deluded, because the root cause of the current shambles is not Railtrack but the structure of the privatised railway in which it operates. If you do nothing about the fragmentation, the Ford factors will remain, the do-nothing railway will be all that we can afford, even before the Government forces the industry to spend £5billion on premature installation of the European Train Control System on top of the Train Protection & Warning System.
Meanwhile for the duration we have the railway in stasis. For how long? Based on many conversations, if you hear someone say that Railtrack will be out of administration this time next year, you have found an optimist. Or as a senior Informed Source put it, ‘putting Railtrack into administration is a very neat way for the government to get into the restructuring of the industry – now let's see how they get out of running the railway'.