Chris Cheek offers a review of rail franchising set against the history of privatisation and the past 25 years as a whole
I realised the other day that I have been tracking the rail industry quite closely now for more than 25 years, ever since we published the first edition of Rail Industry Monitor in 1993 as the Railways Bill was making its way through Parliament.
Over that period, there have been some notable achievements – more than the public or especially the media – are usually prepared to acknowledge. Not the least of these was to change the culture of the industry on safety in the wake of some pretty terrible incidents either side of the privatisation process.
Then of course there has been the whole railway renaissance – a doubling of passenger journeys in twenty years, and a railway system that is today carrying more passengers than at any time since 1923. The modernisation of the system is still a work in progress, but the likelihood is that the network will be unrecognisable in the next couple of years. Compared with the war-battered, exhausted network littered with pre-war rolling stock that I grew up with, it already is.
Against that, there have undoubtedly been failures – most notably by the infrastructure provider (initially Railtrack which then morphed into Network Rail) – in terms of project delivery, sticking to budgets and cost inflation. Day to day performance has deteriorated in recent years to an unacceptable extent – and the physical incarnation of all these occurred manifested itself in the meltdown which followed the introduction of the new timetable earlier this summer.
The other big failure has been in industrial relations. Throughout my childhood and young adulthood the railways seemed to exist in a state of armed truce, punctuated by lightning strikes, overtime bans or ‘works to rule’ every few months as one issue or another boiled over into some form of industrial action – timetable and roster changes were typical triggers, and there were much bigger issues, such as single manning of locomotives or other post-steam changes to working methods, which bubbled up from time to time.
Things did improve for a while after the blood-letting over the strikes of 1982 and the signalmen’s strike of 1994, but we can see with the benefit of hindsight that all too often industrial peace was purchased from the workforce, and the price was to give them what they wanted. Thus, attempts to introduce single manning on South West Trains were abandoned in the face of resistance, even though it had been implemented successfully on other parts of the commuter network south of the Thames.
Stagecoach’s attempts to improve roster efficiency in the early days of the SWT franchise were met with resistance and high levels of sickness, prompting ministers (led by John Prescott) to force management to cave in and withdraw the changes. Real-term labour costs at the train operators continued to grow apace throughout the recession and its aftermath, even when wages were falling in other industries.
Thus, the novel idea that a set of ministers and managers would actually stand up to militancy from RMT and ASLEF came as a bit of a shock, and the whole thing erupted into one of the bitterest labour disputes of modern times, spreading beyond the original business to more parts of the country.
The whole thing has been made more toxic by issues of personal abuse, misinformation and social media bullying. Pity the managers and supervisors who have to recover from all this and try and rebuild workforce morale and the sense of teamwork that successful businesses need.
As I foreshadowed in my last column, all this has resulted in the standard political cry of ‘something must be done!’, and so we are to have another review. One can hear the delighted chortle of Sir Humphrey Appleby, as he looks forward to the agendas, minutes, position papers and endless meetings that will undoubtedly follow: ‘much fruitful activity’, as he put it in one episode of Yes, Minister.
My review of rail franchising
I have five key messages:
- Small is beautiful. Break up the big unwieldy franchises and create smaller, more market-specific businesses. There is strong statistical evidence that the smaller franchises such as Anglia, Chiltern and Cardiff Railway performed better, grew more strongly and enjoyed better customer relations.
Remember BR sectorisation – splitting the network into different market types (regional, commuter and InterCity) was done for a good reason, which remains valid. We should avoid franchises that cross these boundaries.
- Stop micro-managing and step back. The first franchises were let using a much looser service specification, which laid down such things as first and last trains and minimum frequencies, but otherwise left it to TOC managements to flex the network above and around that level.
This enabled them to try new ideas, acknowledging that not all of them would work. This was a much better approach than specifying complete sets of timetables for entire franchise periods, especially given the uncertainties of patronage and revenue forecasts.
- Franchises are too short – they do not encourage or incentivise investment – not just in physical assets, but in the organic growth of the brand, in creating a coherent and committed workforce and in taking risks.
It seems to me that the franchises that really worked were the ones which were originally granted for fifteen years or more. Longer contracts would of necessity bring greater flexibility in the financial planning of franchises.
This is essential. The ending of the East Coast franchise earlier this year when revenue had been over-estimated by two per cent per annum was ludicrous and unnecessary. Risk-sharing should be the name of the game, not scapegoating.
- The review should also address the question of financial sustainability: we need a framework where entrepreneurs and management teams can enter the competitions as they did back in the late 1990s – we can create real contests for smaller businesses that way, rather than our increasing reliance on risk averse overzealous corporates.
- We need an approach in which the culture of the railway industry can be changed decisively from an operations-led focus on moving large lumps of metal into a customer-led focus on the industry’s primary role of moving people efficiently, promptly and cost-effectively
Back in the 1990s, the idea of privatisation was to provide a framework in which private sector capital and private sector enterprise could unlock the potential of Britain’s railway network. 25 years on, we are still struggling to provide that framework effectively. Railway privatisation has not been the disaster that so many people claim; neither has it been the triumphant success that it advocates proclaimed. Maybe another set of reforms might get us there – and addressing my five points above could well get us along that road.