Major changes to Network Rail proposed

[phil-b259]

The intention is that the burden of paying for the railways in this country should fall with the customer, not the taxpayer. This is all well and good, but somewhere along the line all services have to be paid for one way or another. There are certain lines that will never make a profit, so if one takes 'the taxpayer contribution must be minimised' to its logical conclusion, most railways would become far too expensive for people to use. 

 

There must be a better way of running our railways than the current model. I happen to work in Wales. ATW's franchise is coming to a close. The Welsh Assembly want to take control of Wales' railways, so a deal has to be struck between Westminster and Cardiff as to how that will happen. This could result in the railways of Wales and Scotland being run in different ways with the rest of the network being run in a third way.

 

Neither of these three ways will be 'the right way' for all people.

 

I believe that the Welsh are looking at a TfL style setup where rail services are let out as a concession (which may or may not include infrastructure). This model works well in London precisely because rather than attempting to pretend that the railway is nothing to do with them, TfL have embraced their role in the delivery of rail services including specifying the fares to be charged, the timetable, the livery, the staffing requirements, etc. This is appreciated by Londoners themselves - who can of course keep TfL in check through the London Assembly and its vocal representatives, and demonstrates a maturity and degree of realism absent in Westminster.

 

I believe that if nationalisation is vetoed by Westminster, the Scottish Government would also like to move to the concession model rather than 'franchises' so beloved by the DfT - which has never about providing a good service to users and everything to do with clever accounting so as to try and minimise Treasury exposure.

Edited December 4, 2016 by phil-b259

[Mike Storey]

Your final point is interesting - part of the problem from a cost viewpoint is the compensation system (not a culture, it is a system imposed at privatisation in order to 'create a financial discipline' within the industry).  Unfortunately (in my view) it has become a massive end in itself as most parties seem to see it as much as a money machine as a penalty system.

 

There is no need whatsoever to involve the legal trade - simply adding to the money they take out of the industry - as you simply need an industry committee (like the one I used to serve on) to adjudicate on the correct or incorrect application of the agreed procedures.  However what does need attention is a major review of the way the system is applied and used - hence my reference to outside Rules possessions and i would take that further and say the compensation regime should not apply to possessions within Rules of The Route but it would obviously apply to over-runs.  It is an area where I suspect large sums potentially haemorrhage from NR and I suspect they usually exceed costs incurred by operators, and I do wonder how much nowadays comes back the other way?  I also wonder if anyone has ever understood how to apply the original idea of bench-marking when it comes to penalty payments.

 

 

 

I agree with most of what you say Mike (as ever) but on Schedule 4, you have it somewhat out of kilter. S4 for ROTR possessions is designed to be cost neutral already, with NR recovering the same figure through the Network Access Charge. Only overruns, or Outside ROTR possessions carry extra costs now. So NR is rewarded for working to plan, but penalised if it changes or breaches the limits of that plan. Quite straightforward in most cases.

 

I think perhaps you mean S8 (The performance regime) where there is clear evidence of TOCs relying on poor performance by NR infrastructure to boost their accounts. This should never amount to significantly more than the TOC would have to pay out in passenger compensation, but it does, and that is the area which needs reform. They may not be inclined to collaborate in increased possession allowances or higher variable charges to pay for increased damage by their stock, when the original calculations had assumed less damage, if they are making more money by allowing the failures to continue. The Alliance idea was supposed to correct all that, but there is no clear evidence that it did (other than for capacity enhancements and so on), and some on here report the reverse is actually true.

 

As for Tuesday, it would appear the first "pilot", in Varsity Rail, means Grayling will probably have retired before it ever happens. IIRC, completion has been pushed back to CP7? HS2 Phase 1 may well beat it.

 

 

On comments by others:

 

Vertical integration possibilities have been with us for many years. Chiltern (Laings) could have done it, but chose only to do the enhancements. HS1 could have done it, but handed maintenance and repair over to NR and appear, from contractual renewal, to be entirely happy with the arrangement. The possibility was long discussed for Merseyrail, but was bottled. So the issue, despite Grayling's wishlist, will rather depend on who the hell is prepared to take on those risks, and at what cost. I would guess that NR are fighting hard to cover the mirth trying hard to burst through their open mouths.

 

As for getting decision making and activity directed at a much more local level, NR are in the middle of doing just that through their Routes Devolution plan, as per Shaw and others, which she got from them in the first place (Nice little earner that must have been). I am not sure how far they have got with that, but everyone now seems to be called Director of something in the Routes, so I guess it is progressing.

 

I remind those who advocate that the tram systems could teach us a thing or two, that Croydon is beginning to reveal just how minimal their safety systems are, and that far from being more complicated run, they are designed to be as simple as it can be. I would also remind people about the similar situation in Guided Busways, where Cambridge has just discovered it is about to face a multi-million pound, unexpected bill for repairs to the reserved routes, allegedly due to poor maintenance, but at least one expert is saying is due to its inherent design flaws. Bet they wish they had re-opened the railways instead now?......

Edited December 4, 2016 by Mike Storey

[PaulRhB]

The railway isn't like any other business though that can just cut unprofitable 'lines'.

You can't simply apply standard business methods to these services in the modern world where the profitable business competes with roads and free access rail operation but the non profitable franchise required services also have to be paid from the same pot. It would be like Dyson providing brooms to everyone who can't afford a £300 vacuum

[Glorious NSE]

 If you spend a minute considering applying the model currently applied to our railways to, say, supermarkets, you will see how strange it is!

 

I would suggest in retail it's very very common for the infrastructure owner and the service provider to be two different entities, including many many supermarket properties.

[locoholic]

this is the key to vertical integration the ability TO PLAN FOR THE LONG TERM......      ....Thus while supporters of vertical integration may raise some valid points, for it to be as - or more effective than the present setup requires a radical shift in political thinking, something conspicuously absent from Whitehall thus far who continue to fail to see that they (not TOCs, NR, etc) are actually the biggest problem with our railways today

I don't think so - the attitude in Whitehall derives at least in part from the fact that the tax generated by road users (Vehicle Excise Duty and Fuel tax) more than covers the expenditure on roads, whilst the railways soak up government money. Railways are therefore viewed as a nuisance, especially as even after all the subsidies the public still moan about their train service. If I was a politician I would not want to commit to the long-term bankrolling of a transport system that has a proven track record of cost overruns, technical problems, lack of resilience in poor weather, militant trade unions, etc etc., especially when the national finances are so deeply in debt.

 

The only places where heavy public subsidy of rail is accepted is in major connurbations, where the roads are severely congested. Perhaps the only hope for the radical shift in political thinking that would guarantee a long-term future for rail is to allow millions of houses to be built all over the UK, so that all the roads become gridlocked? Tinkering with vertical, horizontal or diagonal integration is entirely irrelevant.

[Re6/6]

The land sale announcement worried me considerably, as much of my more recent career also included scrutinising (and usually opposing) the plans by the NR Commercial Property team to sell various parcels of land off. Many such proposals would have compromised the operational railway, either currently or at some point in the future. There were even one or two hapless individuals in said Property team who just didn't get 'operations', 'safety' and 'rules & regulations', and even when presented with comprehensive opposition, still tried to push their madcap schemes through.

Ah yes, 'Goodharte (Lunatique) Properties Ltd!

[Mike Storey]

I don't think so - the attitude in Whitehall derives at least in part from the fact that the tax generated by road users (Vehicle Excise Duty and Fuel tax) more than covers the expenditure on roads, whilst the railways soak up government money. Railways are therefore viewed as a nuisance, especially as even after all the subsidies the public still moan about their train service. If I was a politician I would not want to commit to the long-term bankrolling of a transport system that has a proven track record of cost overruns, technical problems, lack of resilience in poor weather, militant trade unions, etc etc., especially when the national finances are so deeply in debt.

 

The only places where heavy public subsidy of rail is accepted is in major connurbations, where the roads are severely congested. Perhaps the only hope for the radical shift in political thinking that would guarantee a long-term future for rail is to allow millions of houses to be built all over the UK, so that all the roads become gridlocked? Tinkering with vertical, horizontal or diagonal integration is entirely irrelevant.

 

Most of what you say rings true, particularly with public and political perceptions.

 

But those perceptions are based mostly on things that either are not true, highly contestable or not unique to rail by any means. (Most particularly, it is not a "fact" that road users pay fully for the costs of using the roads, and particularly heavy vehicle users - several studies show such figures in no way include the health costs, new highway construction costs, emergency services costs, congestion costs or other such hidden attributions. Additionally, road fund and fuel duty income has reduced in real terms over the past seven years at least, whilst maintenance backlogs have increased exponentially. In rail, all such costs, perhaps bar health, are directly accounted for.) But such is the world we live in.

[Coryton]

I believe that if nationalisation is vetoed by Westminster, the Scottish Government would also like to move to the concession model rather than 'franchises' so beloved by the DfT - which has never about providing a good service to users and everything to do with clever accounting so as to try and minimise Treasury exposure.

 

The Scotrail branding is already determined by the Scottish Government rather than the franchise holder, isn't it?

[phil-b259]

The Scotrail branding is already determined by the Scottish Government rather than the franchise holder, isn't it?

 

Yes it is - although that was doable under the existing franchising process. Things like setting fares or getting too involved in daily running (where it risks upsetting like the revenues generated from the franchise for instance* are areas that they cannot get involved in unless it becomes a concession

 

(* remember one of the supposedly 'great' things about franchising according to the Treasury is the whole sharing of revenue risk, etc)

[Gerald Henriksen]

 

Without frequent Governmental meddling and the constant changing of priorities, the railway industry would naturally be able to stabilise itself and actually control costs of its own accord. One of the big reasons that Chiltern have been so sucessfull is they have had the luxury of a 20 year franchise - allowing relationships to mature and long term solutions to be devised. For example its unlikely that Chiltern would have decided to bring in rebuilt Mk3s to upgrade their Birmingham offering if they had the usual 7 - 10 year franchise, nor would they have been motivated to push the creation of the new chord at Bicester allowing services through to Oxford.

 

 

Is Chiltern a great example though?

 

Would Chiltern be willing to take on a project like those today, given they are now 5 years away from franchise end?

 

So yes, you can get some great stuff at the beginning of the franchise (which is certainly better than what you get with the others), but at this point of the franchise they are no better than any of the others because they have the same limited time frame issue.

[Edwin_m]

Is Chiltern a great example though?

 

Would Chiltern be willing to take on a project like those today, given they are now 5 years away from franchise end?

 

So yes, you can get some great stuff at the beginning of the franchise (which is certainly better than what you get with the others), but at this point of the franchise they are no better than any of the others because they have the same limited time frame issue.

Indeed.  You also have the risk with a long franchise that they will be less proactive than Chiltern and do very little for their extended franchise period, or exhibit the sort of failures currently being seen on GW electrification (it will be the same people running projects whatever hat they are wearing).  Unless the contract is very carefully worded so the holder can be dislodged in that event, without scaring off the long-term investors who will not fund enhancements without confidence in getting a return, there is a risk of a route being in limbo for over a decade and leaving a huge mess for the successor franchise to sort out. 

[Zomboid]

Which is why the infrastructure owner/provider needs to take the long view. Having arbitrary end dates just leads to a backlog building up as they approach.

[TheSignalEngineer]

Warning - Political Content Ahead

(but purely for historical context.)

 

One thing we have to face is that railways have been a political football since the 1830s. William Ewart Gladstone, as President of The Board of Trade, introduced the 1844 Railway Act. This was the first attempt at 'nationalisation' and imposed many Government controls on what railway companies could and couldn't do. The main reason that the railways were not nationalised following this Act was the 'free enterprise' culture in the mid-Victorian period prevented it. Had not the issue of Ireland intervened Gladstone would probably had another bite at the railway companies when he became Prime Minister in 1868. 

 

For those interested in the politico-economic argument surrounding the issues of State control of the railways this academic paper has some interesting observations on the history of it from an economist's viewpoint

http://www.socsci.ulst.ac.uk/econpolitics/profiles/mf.bailey/bailey_1844.pdf

 

The writer's final point sums up a lot of the comments made on here

 

"Ultimately, it seems that the main lasting value of the debate surrounding the 1844 Act is as an example of how ideas reoccur in economics."

[Nearholmer]

Zomboid

 

Point well made - service contracts that wrap-in infrastructure care, especially long-duration contracts that involve returning assets in a particular state at the end, are very tricky chaps to specify, and very tricky chaps to manage, especially around the final few years.

 

I've extensive experience in this area, but won't say any more, because one of the contracts concerned is in that "last few years" stage right now, and is taxing those involved quite hard, both customer and supplier side.

 

So, vertical integration fan as I am, I wouldn't expect a vertically integrated franchise or concession to be "a walk in the park".

 

Kevin

[The Stationmaster]

Re-orgs,re-orgs. In my 30 years service before privatisation I can remember being affected by about 15, of which at least two were still-born and three others were overtaken by the following one.

In the late 1970s/ early 1980s there was a team based at Euston House whose sole function was to think up re-organisations. It didn't matter who or where as long as there was a re-org going on somewhere. i think it was to keep the Unions occupied so they didn't have time to cause trouble elsewhere.

 

Yes - it's nothing new.  I was, if my memory and counting is correct, redundant or without a minuted post 7 times; was directly affected by 5 reorganisations; and in my final five years (in two different posts) at Swindon wrote a reorganisation every year  (mind you I always asked my team what they would like reorganised and and which of them would like redundancy if I could manage it for them).  Very easy to forget that BR was under constant budget pressure and it didn't change under sectorisation - we had the new, sectorised, organisation introduced in 1992, I rewrote my budget and changed parts of the organisation in 1993 saving over £1 million but slightly increasing the number of staff, and we were reorganised out of existence in 1994 increasing during which year I went through 4 different jobs in four different locations (albeit one was only on paper) in the space of about 4 months.

 

Reorganisation certainly isn't a new idea but there are ways and means of doing it and the people who are at the sharp end of management and now what is involved are very often the ones to do it.

[jjb1970]

I've never worked in rail, but what I've observed in the energy sector and warship construction is that government departments is that they're woeful at understanding commercial conditions and negotiating with suppliers, and they're even more woeful at contract management. If my experiences working with the NHS on energy supply contracts and with the MoD on warship procurement are any indicator of what goes on at DafT then it is easy to see why the department picked up that name and why we've ended up with programs like the IEP.

[Southernman46]

Is Chiltern a great example though?

IMHO probably one of the best as it was originally set up by an old school but innovative thinking ex-BR (SR) manager and his legacy still runs through the company

[Del]

...the railways soak up government money. Railways are therefore viewed as a nuisance, especially as even after all the subsidies the public still moan about their train service. If I was a politician I would not want to commit to the long-term bankrolling of a transport system that has a proven track record of cost overruns, technical problems, lack of resilience in poor weather, militant trade unions, etc etc., especially when the national finances are so deeply in debt.

There is, I believe, not a passenger railway anywhere in the world that does not need Government subsidy to some extent. Some countries subsidise a lot, meaning they have lower fares, some don't. Our Governments want the burden of financing the railway to be borne more by those that use it and less by general taxation.

However, successive UK Governments have also had this very weird fixation on the railway being profitable, which is why we got Beeching and could have got Serpell.

[TheSignalEngineer]

Yes - it's nothing new.  I was, if my memory and counting is correct, redundant or without a minuted post 7 times; ...................

Not always a bad thing. I was displaced on one occasion and my promotion prospects in that particular line took a step backwards. Rather than stagnate I took a sideways move to a job which would give me some different experience. Due to promotional opportunities opening up and another reorganisation, within less than three years I ended up back with my old office but two steps higher than when I left.

[skipepsi]

I would only add two things everything Grayling did with jails was promptly undone by Michael Gove and Grayling had he not been a minister would have been liable for prosecution over his expenses.

[Mike Storey]

I would only add two things everything Grayling did with jails was promptly undone by Michael Gove and Grayling had he not been a minister would have been liable for prosecution over his expenses.

 

I was gagging to say that, so well done. Whilst we must not shoot the messenger, I hope forum rules allow us to wing him a little.

[Mike Storey]

IMHO probably one of the best as it was originally set up by an old school but innovative thinking ex-BR (SR) manager and his legacy still runs through the company

 

See where you are coming from, and CG certainly proved the viability of total route modernisation as a business case precedent, as opposed to the incremental approach BR had used ever since electrification of the WCML, and in contrast to painting lamp posts, which was about all he was allowed to do prior to that. But he also commissioned the Networker - now considered to be the IEP of its day - not one of his best ideas. For the present argument, you could conversely cite that other old-school railwayman, A. Shooter, a proper engineer, who proved a private consortium could deliver the same, via Laings, but the longevity and fragility of such an arrangement was destroyed by Evergreen 3, when the tough got tougher, and they bailed out. I guess Tesco did not help, but even so, cherry picking comes to mind.

[Mike Storey]

Zomboid

 

Point well made - service contracts that wrap-in infrastructure care, especially long-duration contracts that involve returning assets in a particular state at the end, are very tricky chaps to specify, and very tricky chaps to manage, especially around the final few years.

 

I've extensive experience in this area, but won't say any more, because one of the contracts concerned is in that "last few years" stage right now, and is taxing those involved quite hard, both customer and supplier side.

 

So, vertical integration fan as I am, I wouldn't expect a vertically integrated franchise or concession to be "a walk in the park".

 

Kevin

 

Indeed they can be, but the present arrangement with TOCs, whereby they maintain/repair below the roof line (bar some exceptions) at leased stations, has a default clause where their landlord, NR, steps in when they mismanage, and charges them for it. I was party to that (in NR) in the first generation franchises, and it worked extremely well. We would charge twice or more what it would cost for them to do it themselves on PPM, wherever they were in the franchise, and the only arguments surrounded responsibility for some elements which had not been adequately covered in the leases (such as uninterruptable power supplies, foul v clean water drainage boundaries and the like). So if your original specification on maintenance and repair responsibilities, standards and periodicity is adequately drawn, and you are prepared, as the infrastructure owner and ultimately the end responsible party, to be an utter b'stard, in which I excelled, judging from my Christmas party invites in those days, it can work well.

 

But it can and did cause conflict, which is not what current soothsayers want to hear. I am not sure that any arrangement which does not just involve a very large stick, but also has an organisation that both knows when and how to use the stick and is prepared to use it, has any chance of success. This could work for track and trackside infrastructure, but requires the continuation of a knowledgeable owner/landlord (the bit Railtrack forgot). To retain and maintain such knowledge and experience is not cheap. Ergo, this proposal, if as speculated, has 100% naff all chance of saving money in the medium to long term. It can certainly save money in the short term, much as RT did, and look what happened.

[47164]

Lunatics..... keys........asyalum...... enough said !!!

[Zomboid]

My interpretation of the latest BBC news story is that new franchises will be alliances, in the SWT/ Scotrail model.

Be interesting to see how well that works.