The Telegraph today carries an article suggesting that the chancellor could raise some revenue by selling off Network Rail.
Selling the owner of Britain’s tracks, signals and stations would take political balls. But this is a time for bold decisions. And the numbers are compelling. Network Rail’s equity could be worth as much as £14bn, while its debts would be removed from the public books.
That’s one way of putting it. The article goes on to point out some of the things that went wrong the last time this was tried.
Myriad other things combined to kill the company. Under British Rail, too little had been spent on the network for far too long. Railtrack had no knowledge of the condition of its assets. And most important of all, the incoming Labour government hated the rail privatisation of the dying John Major administration and did everything it could to derail it.
Well, yes. I lived through that time. There were other issues too. What is now RSSB was then Railtrack Safety and Standards. As part of Railtrack, it wasn’t sufficiently independent. Another failure was that with privatisation, people were identified with different companies, so the systemic arrangements of BR were fragmented as people moved into their new roles. Railtrack’s safety management system was pretty chaotic in the early days and was still being rebuilt when the crashes at Paddington and Hatfield happened. The ensuing opprobrium was well deserved, but it is too simplistic to say that Railtrack caused the underlying problems, it was the botched political job of privatisation that created the backdrop.
Since Network Rail took over in 2002, the situation has been transformed – mainly because it has been allowed to throw wagonloads of taxpayer’s money at the problem. Whereas public funding for Railtrack in 1999 was just £900m, Network Rail has been happily getting through £5bn-£6bn a year. The upshot is that the network is in far better condition, the company knows its assets and most of the big projects are done.
This is perfectly true. However, we have the same problem that we had with Railtrack – my ball, my rules. Only this time, they are playing entirely with public money. During the past few years they have brought maintenance and much of the renewals work back in-house. Effectively, this has resulted in nationalisation by the back door. Little by little, the small companies providing labour and in some cases rare expertise are being squeezed out of business – and the little matter of one rule for them and another for outside contractors who suffer death by audit. Network Rail is a monopoly and behaves like one.
Just as important, a float would change the company’s culture – providing private sector incentives to improve its performance. The Government may pretend Network Rail is a private company. But one look at its governance structure – 100 trainspotters playing the role of shareholders – gives the game away.
Exactly.
As the annual row over directors’ bonuses proves, these members have few levers with which to hold the management to account. And the management has few incentives to rip costs out of the business and make a proper dent in public funding for the railways – just when it’s vital to cut costs.
Quite. There are likely to be plenty of opportunities to cut waste. During my tenure, there were silly management initiatives that wasted money – such as the appalling Gallup Q12 when signallers in remote boxes merely wanted a decent heating system and working toilet (Iain Coucher’s bonus should over that nicely), not to mention the perpetual reorganisations that continue to this day…
In the meantime, investment on the infrastructure appears to be quiet according to my sources who are increasingly seeing little work to be done and companies such as Jarvis and more recently, Catalis going to the wall.
You could argue that it would be better still to have a vertically integrated railway, with the same owner for both the trains and the track. That could then be carved up as, say, four big regional companies and privatised – similar to the model in Japan.
Yes. I would say that. Frankly, this is what should have happened in the nineteen-nineties. If Osbourne is going down the route of proper privatisation, then a vertical split is the way to go. A company that operates the signalling and track on which its trains operate has a unique incentive to make it operate properly. During the previous privatisation, relationships between signallers, traincrew and trackworkers soured overnight as they became competitors with different company loyalties rather than colleagues. It has taken a decade and a half to restore them. And, importantly, we could lose all the silly delay attribution and buying of paths necessary before a signaller can move an out of place on-track machine to its depot. And, you never know, maybe signallers can go back to regulating using common sense rather than abide by arbitrary regulation polices that are out of touch with the situation on the ground.
xx Railtrack had no knowledge of the condition of its assets. xx
WTF!!!???
That’s a fair comment, frankly. The privatisation was a dreadful mess and Railtrack always seemed to be a bit of an afterthought in the process.
Aside from a desperate desire to get rid of it before the election, would you know what was the reasoning – if any – for the approach that the original privatisation took?
Another spot on post, I couldn’t have put this better myself though I’ve often tried when attempting to explain the arcane workings of the modern railway to the poor punters who actually have to pay for it.
The opportunity to re-invent the wheel and restore vertical integration was ignored by New Labour for ideological reasons and will probably be botched by the coalition because few politicians have any interest in or knowledge of transport, least of all railways. A structure involving four or five big companies plus two or three small ones like Chiltern, with the freight companies and open access operators would be a rational and perfectly workable solution. In place of the pointless delay attribution the Railway Clearing House should be restored, this could also settle timetable disputes and deal with the running rights of different companies, thus enabling the abolition of the ORR. The most important step would be to leave the details and decisions on investment and everyday running to the professionals and remove the dead hand of the DfT for good.
@Clarissa : There was no real reason for the structure of privatisation, except that the Major government knew absolutely nothing about railways ( they weren’t unique in that ). It was easy to spot the politicians who didn’t know what they were on about and were just parroting the party line because they always brought the Great Western Railway up at the first possible opportunity, this being the only private company they had ever heard of, the irony of that is that First Great Western has been one of the worst performers of the post privatisation railway. As Longrider says, Railtrack was an afterthought when someone realised that trains need track and signals.
Clarissa – I think political dogma sums it up. The Major government wanted to go where even the Thatcher one wouldn’t.
Interestingly, the horizontal split was considered during Victorian times and they dismissed it as unworkable.
The main reason for the sale in the form that it took was the need to raise a great deal of cash pre-election for tax cuts – Railtrack was sold for its value as a property developer (and the senior managers viewed themselves as property developers, hence why the actual rail engineering side was allowed to get into such a disastrous state).
I don’t see how you could work vertical integration, though.
In the days of the Big 4, freight and passenger services were confined largely to the relevant company’s tracks, with a few through/joint services. Now, service patterns are set by passenger and freight flows (so, even excluding open access and freight, you’ve got EC, FCC, XC, TPX, Northern and Scotrail operating regular services on the ECML).
If the integrated East Coast company controls the tracks, but half the trains on said tracks are run by other operators, you still need all the rules-based path allocation, delay attribution and billing that the current network features.
So the only ways integration could actually improve matters would be 1) create a single national integrated company (and that didn’t even work under BR, hence sectorisation); 2) savage current service patterns so they fit with geographical boundaries (not exactly customer-friendly…).
That isn’t to say that integration is completely useless. On self-contained commuter lines like LTS and Chiltern (south of Leamington), it could make sense, just as it does on the Underground. But nationally, the current system has got to be the least worst…
The real; problem with railwayus worldwide is lack of technological innovetion – carraige frames are noticeably like those of 1900 while cars have changed beyond all recognition. I think this lack of innovation is precisely because railways have been rationalised into regional monopolies & then nationalised industries.
There is no technological reason why all rail traffic should not be automated (the computer capacity needed is trivail; by today’s standards). We could have a system of single carriage units, weighing about as much as buses & 40% cheaper because no driver, leaving from stations every few minutes, running all night & allowing easy transport links across the country.
In theory this could be done most easily by government decree. In practice it might be better to sell the current system to some innovative company, more Microsoft than a current train company with government guaranteeing to remove all regualtory restrictions on doing this & funding any associated legal & regulatory costs.
Neil – you are all kinds of wrong, to an almost unprecedented degree.
1) railway carriages in 1900 consisted of an iron chassis with a wooden-framed superstructure, and either wood or metal panels nailed to the superstructure. Railway carriages in 2010 are built in aluminium monocoque: it’s *exactly* the same shift that’s occurred in cars. That’s even before we get onto the move to distributed traction (ie replacing locos with multiple small electric motors / diesel engines throughout the formation).
2) railway carriages are designed and built by several major global private sector engineering companies (in more protectionist places, in a JV with the local state monopoly to save face and provide a few jobs; in less protectionist places, by the company itself).
Reasons not to automate all rail traffic:
* the computer capacity required isn’t trivial; more to the point, the nationwide installation of failsafe wiring required would be the biggest electronics project ever undertaken by anyone.
* for good engineering reasons, single carriage units need to weigh about 2.5x as much as buses. They’re also a much less efficient way of getting people around compared to less frequent, longer trains.
* passengers are deeply uncomfortable about unstaffed transport once the speeds go above trivial and complexity of journey and potential dodginess of travelling companions goes above ‘airport monorail’. Hence why the DLR has crew members on all its trains, even though they don’t physically require it.