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Richard Bowker actually used the double ‘F' words in public
SRA Chairman Richard Bowker opened the second session of Alistair Darling's London Rail Review Seminar. The session themes were cost and regulation and Richard did not hold back.
‘We are in a quite dangerous place at the moment; we have a serious risk of institutionalising a cost base which is at an unaffordable level', was his lesson for the day. But there were some radical changes in his views on why this is the case.
This column has repeatedly spanked proponents of official government line that soaring infrastructure expenditure has been the inevitable result of catching up with ‘decades of underinvestment'. Nor has the boiling frog cost explosion been accepted as a valid indicator.
In September 2002 Richard Bowker said ‘Personally I couldn't care less what it cost BR. All that matters is what it costs now and what we have to do to get it under control'.
‘We have to be radical, even brutal – and challenge every penny'. SRA Chairman Richard Bowker March 23 2004 |
So it was a Batemanesque moment when he told the seminar, ‘I really take the view that the current rate of spend on the infrastructure cannot be explained simply by “we are fixing the backlog”'.
Now the next evening I presented a paper on the rising cost of railways to the Transport Economists Group. I don't know how much they benefited, but I learned a lot. One questioner pointed out the ridiculous situation whereby it had required a failed engineer turned writer with a spreadsheet to expose the increase in unit costs since privatisation.
To which should be added the relaxed attitude taken by key figures at the top of the industry to these cost increases. It was this passive acceptance of rising costs that was described as ‘Boiling Frog Syndrome'
With customary modesty the current cost/BR cost ratio was dubbed the Ford Factor and on average is around pi. Network Rail still denies its validity, but Richard Bowker has finally got the message. Because apropos the backlog theory he added ‘while there will be many who will debate precisely what the level of the Ford Factor actually is, there is no doubt that infrastructure operation, maintenance and renewal are costing more than before even allowing for the backlog'.
But that is just ego-tripping. The biggest issue for Richard was the regulation of the industry. He agrees that independent economic regulation is needed to maintain market confidence, but the form of this regulation ‘merited debate'.
In a pre-echo of the Transport Select Committees report published nine days later the SRA Chairman described the current structure of the industry as ‘confusing and overly complex'. ‘I think the biggest difficulty we face is the splitting of the specification role between the SRA, for train services, and the ORR for infrastructure. That has to be fundamentally reviewed'.
There is a phenomenal amount of process that is expensive and time wasting that is going on within the industry SRA Chairman Richard Bowker March 23 2004 |
I don't think this was a continuation of the SRA/ORR turf war, since the ability of an unelected Regulator to decide on how much the nation spent on its railways was a common concern throughout the Seminar. And before Tom Winsor gets stroppy, he didn't seize his powers in some coup d'etat but was given them under the privatisation legislation.
But, as Richard said, it is ‘a legitimate right and duty' of the government to specify outputs from the railway into which it was putting ‘a very considerable' amount of cash. This does not mean that the government ‘or its agency' should micro-manage delivery: but it should be prepared to intervene when the market does not deliver.
Richard Bowker is clearly a born again railway realist, because he now believes that the railways' current regulatory model was designed for ‘a world that no longer exists'. The Conservative privatisation model assumed that government support for the privatised railway would diminish. Now, says Mr Bowker, funding is unlikely diminish because the railway is a public service which will continue to require support for investment.
While Richard may have seen the light, John Armitt is still swimming happily around on top of the roaring Bunsen burner. In the second session I put my hand up to ask a question. Since I had already had one go, Alistair Darling said ‘I'll come back you' – but then seemed to lose interest (understandable Ed).
Until by accident or design I got the last question and did the subsidy per passenger 1989/90-2003/04 bit – the cost having gone up by about pi. Now Mr Darling may kept me to last because he knew was coming. Anyway, turning to John Armitt he quipped ‘I ask him that every week'.
John said he would give me the usual answer. ‘I would rather focus on what we are doing today and understanding what we are doing today' to drive costs down. ‘To achieve that I don't believe I need to understand what went on in the 1980s. What we need to do is address today's structure and today's issues'
But this complacency was not shared by the panel. Regulatory policy wonk Dieter Helm, see below, picked up the point that the comparison with British Rail in 1989 showed that the current system is ‘very inefficient and very expensive and we must be able to do better'.
And even Richard Bowker came to my aid. In his view BR had a ‘pretty good idea' of the profit and loss implications of running an additional service. ‘They knew the relationship between operations, maintenance the renewal of the infrastructure and the cost of running the trains service'.
He even went so far as to turn up the gas. ‘John Armitt does not know today what the cost of running train services is and I don't have the visibility I would like of the OMR of the infrastructure'.