Outlook: Now farepayers must keep the runaway train steaming on

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Without so much as a blush, Alistair Darling yesterday announced that train fares are to rise by an inflation-busting 4 per cent, only three weeks after his department was pooh-poohing any such suggestion. Moreover, the range of fares subjected to price cap regulation is being reduced and train operators will no longer have to cut ticket prices if they fail to perform.

The Transport Secretary seems to have got fed up with shovelling taxpayers' money into the engine so now it is the turn of passengers to keep the runaway train on the rails.

Mr Darling treated the Commons to a wagon full of statistics to justify his announcement: £9bn is being spent on the West Coast Main Line, £3bn on new commuter trains for the South-east, and £73m a week is being heaped on improving the railways in general. A disproportionate amount of this burden is now falling on taxpayers, rather than farepayers, and that's just not on. Four years ago, rail fares covered 72 per cent of the network's costs. Today they only cover 53 per cent.

What Mr Darling failed to point out is that this is not because the amount being raised through the fare box has gone down. The reason that it covers less of the bill is because spending on the railway has gone up. And the reason there has been an uncontrolled explosion in costs, as the Rail Regulator Tom Winsor will tell him, is that the network is now being run by a state-backed company which is neither fish nor foul, neither wholly public sector nor wholly private sector, and therefore neither properly accountable to either taxpayers nor investors.

Network Fail has already presided over a one-third increase in costs without any improvement in performance since administration, and now it is asking for a cool £28bn just to keep the railways in a steady state. Mr Darling's Kafkaesque solution for our crumbling railways is to make passengers pay more for fewer services so that those which do run have a better chance of arriving on time. A worse service for more money? It could only happen on the railway.

Mr Darling was sent into the department to take transport down the political agenda after the débâcle of the Byers era. Yet like a runaway train the momentum just keeps on building. If he and Mr Blair are not careful, there will be a dangerous head of steam by the time the next election arrives.

Tyson report

The debate on the role, composition and effectiveness of non-executive directors sometimes doesn't seem to have moved on very much since Tiny Rowland, former chief executive of Lonrho, famously described them as just decorations on a Christmas tree. His remark was mischievously intended to create as much shock and outrage as possible among corporate governance cognoscenti. Yet even today, the furore over the Derek Higgs report suggests that many chief executives would agree with him that the only real purpose of non-executives is to add respectability and if their connections help win a little business, so much the better.

Into this maelstrom of corporate governance debate now steps Laura Tyson, Dean of the London Business School, with a report commissioned by the Government on how to create greater diversity on UK boards. It would be easy to mock its findings as a statement of the blindingly obvious. For instance, its key recommendation is that there should be more and better evaluation of board members as well as a more rigorous and transparent selection process for non executive directors.

As a statement of motherhood and apple pie principle, they don't come any more uncontroversial than that. Perhaps sensibly, she's ducked all possibility of upset by studiously ignoring a part of her brief - to draw up a list of 100 individuals with a non-commercial background that might make good non executive fodder. Eat your hearts out Posh and Becks. Maybe you wouldn't have been on the list even if there'd been one.

None the less, just by raising the issues, Ms Tyson's report serves some purpose. All too often the approach to recruitment of non-executive directors is informal, networked and unprofessional. Sometimes it really is a question of jobs for the boys, or at least an established and quite limited gene pool of rent a non-executive types.

In a speech last year, Lord Browne, chief executive of BP, put the case for change as well as it ever can be. "A commitment to finding the best talent for a company means a commitment to diversity", he said. "Companies should want to employ the best people at every level including the board level and should therefore want to search for the best possible people everywhere".

So is there any evidence that greater diversity leads to increased corporate performance? None whatsoever. Indeed the recruitment of complete outsiders to a board, however talented, can be detrimental by creating suspicion, loss of trust and lack of cohesion. The best teams are for obvious reasons often groups of friends. Diversity is not always the no brainer it might seem. Even so, Ms Tyson is surely right in suggesting that boards do need to conduct much wider searches for non executive talent than has hitherto been the case. Benchmarking of boardroom composition ought eventually to encourage better practice.


Strange though it may seem, the Saatchi brothers, Maurice and Charles, once nearly made a takeover bid for Midland Bank. Plans were so well advanced that they even had their own codename - Project Chalice, whether poisoned or not history doesn't relate. In any case it never happened, and the approach later came to be seen as symbolic of the top of the market hubris which was running riot by the mid-1980s.

Today the brothers Saatchi can only look on philosophically as Cordiant, the final remnant of their once mighty publicly quoted empire, is acquired for a pittance by their former finance director, Sir Martin Sorrell, advised by HSBC, now the proud owner of Midland Bank. There can be few more graphic examples of the constantly shifting sands of corporate fortune.

For Sir Martin's WPP, it is not quite yet a done deal. He's seen off Publicis and its vulture capital partner, Cerberus Capital Management, though both have gained from the destabilisation of Cordiant they've helped bring about - the one by acquiring one of Cordiant's major clients, Allied Domecq, the other through a tidy profit on its holding of Cordiant bonds.

However, there's still Active Value to contend with. Yesterday it bought another 10 per cent of Cordiant's shares in the stock market, making its total shareholding large enough to block WPP's scheme of arrangement offer. WPP's bid leaves many shareholders including Active Value nursing huge losses, but though they can make a lot of noise in protest, they cannot influence the outcome. If Active Value blocks the scheme of arrangement, Cordiant will be put into administration and WPP will acquire the assets by that route instead. Brian Myerson should rename his company Active Value Destruction.

Economic gloom

That increase in the rate of National Insurance implemented at the start of the tax year may have done more harm than the Treasury predicted it would. For the first time in ages, unemployment is starting to rise, not withstanding the huge number of jobs being created in the public sector. And for the first time in ages, retail sales are now falling. Both employer and employee has been made poorer by the increase in NI contributions. How directly this feeds through to rising unemployment and falling retail sales is impossible to say, but it's hard not to make the connection. The economy feels firmer than it was, yet in the long run, growing the public sector at the expense of the private is unstainable and economically damaging.