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For one month only, Informed Sources brings you Tony Blair, Alastair Darling and Richard Bowker, singing in unison from the same hymn sheet – and talking through their hats
This column is a veritable bestiary these days. The floor is ankle deep in boiling frogs. If you don't keep alert, the latest chicken coming home to roost can take your head off. Above, flocks of canards squawk noisily.
Naturally, we have ways of dealing with this menagerie. All you have to do with boiling frogs is shine a bright light on them. Even 10 Downing Street is up to speed on railway poikilothermia. And since this column counted the chickens out – as in the case of CBI for example – we simply count them back in while trying not to say ‘told you so'.
Canards are more pernicious and require special measures. They are tenacious little blighters so overkill, in the form of the columnar 20mm flakvierling, is the order of the day. It may not be sporting but it usually works.
In the railway today, one role of the canard is to neutralise unhelpful comparisons. While no one has challenged the cold numbers in the sundry boiling frogs and exploding subsidy analyses in this column, their end use can cause distress in high places.
It's a bit like a six foot piece of yew and a length of cord - fairly innocuous separately, deadly when combined. Thus, the fact that the railway is receiving £3.8billion in Government support this year is just a fact of life. As was British Rail's subsidy in 1989/90 of £586.8million. But bring the BR figure up to present day prices and out pops the catchy, if unhelpful, soundbite ‘this year the railway is receiving four times as much subsidy as BR in its best ever year'.
Now that is pretty unequivocal. But boiling frogs are a tad more subjective. The Ford Factor, currently pi, is based on a basket of BR projects going back to 1966. Necessarily comparisons are not exact. But even so it is, at worst, a comparison of Cox's and Bramleys, rather than the ‘apples and oranges' used by defenders of the privatisation faith.
Anyway, it is still unhelpful and in June the message ‘The BR numbers were wrong' came from both the Treasury and the Strategic Rail Authority. In fact, my old chum Richard Bowker has been bending my ear with this theory for some time, but it was interesting to get it in stereo.
As Richard explains it, he has been talking to former BR managers who tell him that they hid costs. And he is absolutely right. Indeed, I am glad of this opportunity to pay tribute to a manager who did just that.
As Managing Director of InterCity West Coast, Ivor Warburton decided on an inverted scorched earth policy of resistance as privatisation, to which he objected strongly, approached. Instead of running down the infrastructure, he decided to build it up, pouring as much money as was available, in very difficult times financially for the railway, into the track.
According to Informed Sources, this ‘irrigated earth' policy included relaying the 110mile/h fast lines with the closer sleeper spacings for 125mile/h. And, on 1 April 1994 , Railtrack took over a WCML free of TSRs on these lines. Clearly, the cost of the extra sleepers and Pandrol clips was lost somewhere.
But there are limits to how much you can lose. Don Heath, who brought the East Coast Main Line Electrification in on time and on budget for around £750 million in modern money reckons that another 10-20% to spend would have been ideal, but the scheme would not then have got past the Department of Transport and the Treasury.
But to bring down the Ford Factor, Don and other BR project managers would have had to smuggle several hundred millions past the BR Board and its accountants, the Department of Transport who backtracked the financial out turn of all major projects, the Treasury and, quite possibly, the National Audit Office. Does that sound likely?
You could argue that the modern projects are inflated by compensation for disruption paid to train operators – totalling £600 million when the WCRM was budgeted to cost only £6.3billion for the full 140mile/h dream. Informed Sources tell me that revenue loss was indeed allowed for in BR project budgets, but involved very little money since there was very little disruption. I can remember footplating an IC125 up the ECML while the wiring teams worked, quite safely, on adjacent tracks. Then Health ‘n' Safety came on the scene.
So, having disposed of that canard, we come to the main event.
Here are three quotations.
Prime Minister Tony Blair 2July 2003 ‘After the Hatfield rail disaster it was recognised that the state of the rail infrastructure was infinitely worse than we supposed. This was the result of years of underinvestment in our rail infrastructure which we are now putting right'. |
Transport Secretary Alastair Darling 1 July 2003 the people who call for yet another change to the structure of the railways are missing the point. The fundamental problem for the last 30 – 40 years stems from the lack of sustained investment, year on year. |
SRA Chairman Richard Bowker 30 June 2003 British Rail didn't spend anything on renewals and investment for the best part of 30-40 years. They spent only that which they could afford and that was heavily controlled by a Treasury focused on public expenditure, not actually investing in the rail network. Now that is not a criticism, just a statement of fact. |
Note the same message, escalating as it gets closer to the railway.
Now it is, of course, received wisdom among the chattering classes, that railways, and roads for that matter, have been subject to underinvestment by governments of all colours over decades. This causes me a degree of cognitive dissonance. I spent my first 17 years on this magazine writing about a railway going forward and improving. One of my first press events was Labour Transport Minister Bill Rodgers opening the Great Northern electrification. My first big feature was the launch of InterCity 125 later that same year. And there was always some new project to write about.
True during the first couple of years chairman Sir Peter Parker was warning the Government of a ‘crumbling edge of quality' that threatened services if more funding was not made available, but that passed. In fact, no one ever showed me any signs of crumbling. Rather the quality of main line track improved as speeds increased.
So when I got same counter intuitive message on three successive days from seriously important people, my curiosity was roused. Firing up my new electronic difference engine I spent some time spreadsheeting maintenance and renewal expenditure from 1975 to the present day. And the results surprised me greatly.
Chart 1 shows expenditure on maintenance and renewal at constant 2003 prices during my time on this magazine. From which you can see that Richard Bowker's statement of fact that ‘BR didn't spend anything' isn't quite right. BR's annual spend on maintenance exceeded Railtrack's in its short unhappy life. And by quite a margin – except for two critical years.
And, swinging the still smoking four barrels round to Marsham Street , maintenance expenditure was sustained. Yes it went up and down with the economy, but until 1992/3 it was never less than £1billion a year and for seven consecutive years, presumably when the crumbling edge was being restored, it was over £1.2billion.
About the numbers British Rail renewal expenditure figures are taken from Mike Anson's Tables in ‘British Rail 1974-97' by Terry Gourvish. They cover track renewals, signalling and track rationalisation and electrification. Maintenance expenditure is taken from British Rail Report & Accounts. They cover permanent way earthworks, bridges and tunnels and signalling but exclude telecommunications. Railtrack figures are taken from the Report & Accounts and Network Management statements, The figures for 2000/01 are the projected spend in the 2000 NMS. All costs are at 2003/04 prices |
As remarked in the May item on rail replacement rates, there was a slight ‘maintenance holiday' from 1986/87 onwards, reflected in this chart, which, senior managers at the time confirm, was a by-product of the Sprinterisation of Regional Railways. Even so the saving was only around 10% and maintenance was on the way up again, reaching £1.2billion in 1991/92 when the collapse of the Thatcher/Lawson boom of the late ‘80s hit the railways hard and John Major was elected on a manifesto including rail privatisation.
But before we get into the 1990s, consider renewals. Once again, there is the increase during the second half of the 1970s. After that, although the charts varies a bit more widely, renewals averaged £575million a year through the 1980s – and we got a lot for the money.
Then, the world changed. John Welsby became Chief Executive in January 1990, with a new Chairman, Sir Bob Reid II, who lacked the political skills of the ‘real' Bob Reid. With the economic outlook bleak and John Major ‘worried about the rising costs of British Rail' JKW had to respond.
In addition to the economic situation, privatisation was looming. To protect renewals, Welsby slashed maintenance in BR's last two years.
It was the scale of the cuts which was the second of several surprises in this analysis. But renewals were sustained up to the BR's final year (1993/94), possibly reflecting the political need to finish the upgrading of the Channel Tunnel routes in Kent .
From 1 April 1994 Railtrack took over responsibility for the infrastructure. Now comes another surprise. Given the severity of the Welsby cuts and a recovering economy, you would have expected maintenance and renewal to have climbed back towards the sustained levels of the past two decades. After all, the same managers and engineers and maintenance teams who had been responsible for the infrastructure under BR on 31 March were still responsible on 1 April.
But no, while Railtrack got its act together, and looked forward to privatisation in 1996, maintenance spend went back to just under £880million in 1994/5, £890 million the following year, and then started to decline. At the same time, in the first two years renewals dropped and then started to climb steeply, equaling historic spend levels in 1996/97 and continuing upwards to reach £970million in 2000/01 – the year of the Hatfield derailment.
Both trends reflected Railtrack's official policy which was to have a bow wave of increased renewals which would pay off long term in falling maintenance costs. It was all there in the Network Management Statements.
Chart 2 shows maintenance and renewal spend combined. I have added passenger train km as an indicator of the wear and tear. And immediately cause of the current situation becomes clear.
As you can see, from 1994/95, under Railtrack, the major increase in renewals means that the combined spend increases year-on-year. But even in 2000/01 it is still short of BR's average spend and £140million short of BR's 1991/92 total.
And you will note that train km had also been climbing through the 1980s, leveling out around the same time that maintenance and renewal spend had recorded its fifth highest year since 1975.
After this, Chart 2 suggests that infrastructure is on the back of the drag curve and sinking fast, with wear and tear rising faster than maintenance and renewal expenditure. And, as this ever cheerful column invariably points out, it is even worse than that.
As the floatation of Railtrack approached, under Chairman Bob Horton and Chief Executive John Edmonds, I can still remember one director telling me that he was confident that 30% could be taken out of maintenance costs by bringing in outside contractors. And the RT1A maintenance contracts included RPI-3% efficiency gains. I can also remember, during the Rail Regulator's Periodic Review of Track Access Charges, Tom Winsor telling a conference that he was looking for substantial efficiency savings in the second five year control period starting in April 2001.
Clearly, everybody thought that monolithic old BR, far from not spending anything on the infrastructure, had been positively profligate, leaving the hyper efficient private sector plenty of fat to remove.
But, as we now know, not only was Railtrack spending less, it was getting less for its money. One high level informed Source reckoned that in 2002 only 48p of every pound spent was going into the ground. And the various boiling frogs analyses – including a corker to come shortly – confirms that renewals spend buys at best half of what BR was getting.
But, one question remains. How do we know that, even at an average of £1.79billion a year BR wasn't underspending on maintenance and renewal?
While I am not a great fan of international benchmarking, a UIC study of railway maintenance and renewal expenditure published in the March 2003 Railway Gazette International does provide some comparators. The study quantified infrastructure maintenance and renewal expenditure for 15 European railways on the basis of the cost per main track km.
For all the railways, the mean was Euros 64 000/main track km. Given variations in traffic mix and intensity individual spends ranged from a low of Euros 34 000/main track km, to two networks spending 96 000/main track km.
And you won't be surprised to learn that over the period 1975-1991 BR averaged Euros 94 000/main track km at 2003 prices. Given that BR was regarded as one of the most cost efficient state railways in Western Europe , this supports the analysis that the ‘decades of underinvestment' argument is invalid.
Post privatisation, Railtrack averaged Euros 82 000/main track km up to 2000-01. Following Hatfield, expenditure in 2002-03 was Euros 168 000/main track km and for the current year is forecast at Euros 206 000/main track km.
So, it looks as though from 1975 to 1991 maintenance and renewal expenditure was sufficient to sustain the infrastructure, with rising traffic levels. From 1992, equilibrium was lost, with expenditure failing to recover from the cuts imposed by the Major Government, just at the moment when franchising drove train km upwards again. Add in falling levels of efficiency of work on the track and trouble was building up.
Even so, Railtrack might have got away with it if it had not been for Hatfield. The concept of investing in higher quality renewals in the short term to gain lower maintenance costs in the long term remains valid. But Railtrack took its maintenance benefits early.
In all of this, there is one puzzling feature. Welsby's maintenance cuts must have been agreed by the infrastructure directors of the vertically integrated businesses which came into being under Organising for Quality (OforQ) in 1992. They must have been implemented on the ground by the managers, engineers and charge hands who knew their infrastructure intimately.
Through 1994 and 1995, these teams where broken up into 13 British Rail Infrastructure Services (BRIS) units and sold in 1996 with RT1A contracts in place. These contracts determined the levels of spend on maintenance and renewal.
While we talk about Jarvis, Balfour Beatty or Carillion, on the track and in the offices, many of the faces are the same as in the 1990s. Did these people not realise that they were spending less than under BR? At Railtrack Headquarters and in the Zones, there was certainly no such awareness because senior engineers had been ‘promoted' to run the business.
Similarly with the rising train miles. There was provision in the RT1A contracts for increased use to authorise additional maintenance expenditure. Informed Sources claim that such authorisation was not triggered by Railtrack – leaving the contractors to do more work than planned on the same, declining, budget.
But why, only after Hatfield, did the same engineers and managers suddenly ‘recognise' as Tony Blair put it that their infrastructure was in such a poor condition? After all, under Gerald Corbett's Key Performance Indicators driven regime the various track quality parameters were improving until the rail failed at Hatfield?
We see on the Great Eastern Main line the reality of these charts in microcosm. Running on Essex clay the track needed regular attention to nip wet spots in the bud. But the last two to three years have seen wet spots proliferating. As one wet spot went untreated, the loading and unloading of train suspensions started a second and then a third. Now we are told that it will need 17 weekend blockades a year for 10 years to put it right.
Sorry, Tony, Alastair and Richard, you can't blame BR for your current politically embarrassing situation. The damage was done by John Major's Government after 1992. If you accept that, a big ‘if', we can start to determine what went wrong in the last 10 years and restructure the railway to remedy the situation.
Network Rail is already doing this by taking the first three maintenance areas back in house. This analysis also give Tom Winsor something to aim at in the long term. Clearly we are not going to get back to the £1.8 billion a year which sustained BR, but when ten years of underspend have been recovered we should expect a percentage increase on that figure rather than a multiple.
Currently ‘restructuring' is politically incorrect and equated to ‘renationalisation'. This is not surprising since, just as the same managers and civil engineers have been in charge throughout, so many of the civil servants who devised the privatised railway structure are still at work in Transport and the Treasury.
Actually, the main architect, Steve Robson, then Under-Secretary at the Treasury, is now retired with a knighthood. I will leave Sir Steve to have the last word – quoted in the excellent book by Yoshiyuki Kasai on the break up-up and privatisation of Japanese National Railways.
Responding to a question on the separation of track and trains in the UK privatisation Sir Steve drew a parallel with the UK electricity privatisation where generation and distribution were separated. ‘I think it is actually more challenging to run an electricity system, because you can't change the speed at which electrons move like you can change the speed of trains, than it is to run a railway system. If you can disintegrate an electricity system, then you can disintegrate a railway system'.