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When words are not enough

April 2012

Robert Wright

The long-awaited command paper containing the government’s response to the McNulty report has been released. But, apart from stating the obvious and re-emphasising previous announcements, is there anything new? Robert Wright takes a closer look

It’s a worthwhile test of a phrase that sounds suspiciously fatuous to imagine for a moment it is stating the opposite, then check if it’s still worth saying. Statements so obvious one would never say the obverse are generally a waste of ink. Vast tracts of the Department for Transport’s rail command paper, published on 8 March (see page 5), fit very neatly into this category. Examples include:

‘Only by making sure everyone in the industry has clear objectives and aligned incentives will we be able to secure our objectives.’

‘A one-size-fits-all model is not likely to be appropriate.’

‘We will strike a better deal on behalf of farepayers and taxpayers.’

They’re phrases that ring because they’re hollow. They make one nostalgic for the days of New Labour English.

Yet, as with much leaden phrasemaking, the writing’s dreadfulness is a mere symptom of a more serious problem. The command paper totters on foundations of the flimsiest thinking and, at points, on outright contradiction. It purports to be addressing both the railways’ over-reliance on taxpayer subsidy and excessive fares – as if the two went hand in hand. But, even if they set themselves achievable aims, it’s hard to imagine the command paper’s authors would have any firm idea how to achieve them. The main good news is that government is not seeking, in its confusion, to undertake yet another wholesale reorganisation – even if it tells us some of its ideas are ‘radical’. It is also worth saying it would be marvellous if the railway industry could by 2018-19 save the £2.5bn a year that the government asserts is possible.

There is no doubt that the industry’s costs are too high and it would be an uncovenanted good if they were to fall sharply towards the level that continental Europe’s best performers claim.

The problem is that the command paper is desperately short of ideas on how the needed cost reductions are to be achieved. Neither Sir Roy McNulty’s review last year, nor the Office of Rail Regulation work on cost differentials with continental Europe, has produced a convincing-sounding explanation of why costs in continental Europe appear lower and how Britain’s can be brought down to the same level.

Sir Roy, in particular, was dismissive of the idea that some UK costs will always be inherently higher because rail maintenance and other equipment designed for continental European structure gauges is unusable in the UK. Yet it defies belief that being outside the vast continental market is not imposing at least some extra costs.

It remains inherently unlikely, meanwhile, that the costs from countries where the main actors are a state-owned infrastructure company and a state-owned train operator are anything like as fully recorded as those in the UK. At least some of the apparent difference must be down to the greater attention paid in the UK to costs that can, after all, be the subject of an expensive dispute.

If the UK is stuck with some higher costs in perpetuity and continental costs are higher than reported, at least part of the demand for the UK to meet continental efficiency levels could easily be moot.

But, rather than address such meaty issues, much of the paper is given over to restatement of previous policy announcements – the government’s funding of the Thameslink upgrade and the fact that high-speed rail is a good thing. There’s also a list of gripes so comprehensive one’s tempted to wonder if Passenger Focus was allowed to write sections. Do we really need to hear again that railways need to be better at communicating with passengers when it’s snowing? And it hardly seems worth reiterating that passengers don’t like rail replacement bus services.

The central problem, meanwhile, remains that the relationships between Network Rail and train operators fail to reflect the true nature of the costs the two impose on each other. The track access charging regime reflects nothing like the true complexity of the costs of putting on extra trains, while train operators are deliberately insulated under their franchise agreements from changes in the overall levels of track access charges. The system undoubtedly needs fine-tuning.

But such tweaking promises nothing like the degree of change that the command paper’s one big idea could yet achieve. The DfT hopes that route-by-route partnerships between train operators and Network Rail may give both sides an incentive to bring down whole industry costs. Train operators may have an incentive to operate more track-friendly trains under the new arrangement, thepaper suggests. Network Rail may have better incentives to organise engineering work in ways that still help train operators to maximise revenue.

There has to be a good chance that this approach will produce some improvements. Train operators at present, for example, might have only limited incentive to put trains with wheel defects through expensive wheel lathing, since Network Rail bears the costs of the track damage. A train operator that knows it might benefit from the saved maintenance costs from wheel lathing might well take a different attitude.

But, for the most part, the burden of cutting costs looks set to sit squarely on the shoulders of Network Rail, the organisation whose predecessor did most to push costs up in the industry’s dark days around the turn of the millennium. However little it might approve of the governance and structure of the infrastructure company, the government’s best hope of cutting rail costs is that Network Rail continues to make the progress towards hitting its regulatory targets that it has been fairly steadily making since 2004.

Network Rail, of course, is unlikely to provide cost improvements at the scale that Justine Greening needs. She, after all, has promised the travelling public that she will not only cut back subsidy levels but scale back increases in controlled fares from the current annual rate of three points above inflation to only inflation.
Almost no conceivable efficiency improvement could bring that goal within reach. But, in the absence of any recognisable policy for tackling the industry’s real problems, steady progress is probably the best the government can expect.

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