Tuesday, January 02, 2018

Cut the ideology – let’s design a passenger driven Railway system.

The railways have been nationalised – and there's no turning back

Virtually every part of a modern economy like Britain's is a public/private partnership. Every private enterprise relies to a greater or lesser extend on publicly provided services. Every public enterprise buys goods and services from the private sector – and many have benefited from “contracting out” – buying in services rather than managing them in house. The latter route can be for a variety of reasons but efficiencies and cost control are the main ones as well as the need to buy professional services which it would be inappropriate to manage within the organisation. Ask any Hospital manager whether he could manage without the private sector – the answer is of course no.

For major and vital public services like the Railways the question is about where you draw the line – you know that the public sector and the private sector have to be involved. That is self-evident. But how do you decide who does what? The tracks and stations are publicly owned and managed via Network Rail. This solution was not the original one (remember “Railtrack”?) but it was soon apparent that these strategic facilities had to be publicly managed and owned. But the trains that run on the tracks and call at the Stations are in the private sector. Sort of! They have to receive subsidies if adequate services are to be provided in some areas and on lines that would not conventionally be profitable. It’s a bit of a mess and it doesn’t work well.

Private sector companies strive to make profits to reward employees and shareholders and to invest in the future. That’s what they do. But every pound of profit that is distributed in dividends rather than invested in capital projects is a pound denied to the future health of the business. Contrast this with the London Underground which makes a profit but, once expenses have been paid, reinvests in the future of the Tube. A good model you might think.

So the Railways suffer from under-investment because of shareholders’ (legitimate of course) demands. In addition, in some cases, they are only viable at all because of subsidies. The Private sector blossoms in conditions of competition. But the Railways are not really competitive except with other modes of transport (Cars and buses and aircraft). Technically the passenger has a choice on some routes but these are rare and frankly not over significant. Most railway services (and virtually all commuter ones) are private sector monopolies. The worst provider model imaginable!

The last thing this subject needs is ideology! Those on the Right who clamoured for privatisation got their comeuppance (sort of) with the ugly demise of Railtrack. But only those who are too young to remember could be unaware that the ideologically nationalised “British Rail” became a very poor service indeed through underinvestment and appalling industrial relations. An ideological soapbox is no place from which to outline what should happen to the railways. Except to say that it must be customer driven – passengers and freight users should call the tune not politicians.

It seems to be that some variant of the London Underground is desirable – an integrated service with fair fares, generally good services and constant reinvestment and upgrading. For the much bigger challenge of the UK’s railway system the example of the Tube is a good one. Let me stress that this does not mean a return to “British Rail” and it may not even mean public ownership. We need to think out of the ideological box and work out a formal long term public/private partnership that puts the customers first. It should also be environmentally driven – especially in relation to fares. The more people who eschew the car and let the train take the strain the better it will be for the environment.

My “Solution” is directional – which is why it is vague. I am not saying “Nationalise the railways” – though as with Network Rail there are no doubt parts of our railway system that should be brought back into the public sector. And where the current train operators do give a good service they should not be punished – though they certainly should not be allowed to generate windfall profits and pay excessive management remuneration. But we must have a more integrated service with a comprehensive, consistent and generic fare structure. There are examples across Europe of national railways that work. Britain should reform massively and seek to match them.