The Big Question: Was the break-up of the railways such a disaster that it needs to be reversed?

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The Independent Online

What is the problem?

Too many passengers, not enough trains. Launching a review of the rail industry yesterday, the Conservatives summed up the most likely scenario if the network stays as it is: "More and more passengers, on more and more overcrowded trains, and with constant upward pressure on fares to try to take the sting out of overcrowding."

The demand for train journeys is forecast to grow by 30 per cent over the next 10 years, but there are no plans for any major increase in capacity between 2007 and 2014.

Fundamentally, the Tories are arguing that Britain does not spend enough on long-term investment in the railways and that present expenditure is wasteful.

Did the original structure imposed by the Tories work?

Nobody thinks so - as of yesterday, not even the Conservatives do. The party's transport spokesman, Chris Grayling, said: "We think, with hindsight, that the complete separation of track and train into separate businesses at the time of privatisation was not right for our railways. We think that the separation has helped push up the cost of running the railways - and hence fares - and is now slowing decisions about capacity improvements. Too many people and organisations are now involved in getting things done - so nothing happens."

More than two dozen passenger train franchises were created in 1995-96 and there was no effective central co-ordination of the network. It was a shambles. Perhaps the least-loved child of the Tories' privatisation was the now defunct Railtrack, which was meant to look after the network used by the train operators. The "core" business of Railtrack - maintaining the track - was farmed out to engineering companies, with little provision made for overseeing their performance.

Some critics assert that the structure created by the Conservatives was directly responsible for the Southall, Paddington, Hatfield and Potters Bar disasters.

The Labour Government established the Strategic Rail Authority to get a grip on the system - a function more recently taken over by the Department for Transport. Following the controversial liquidation of Railtrack, the Government created the "not for profit" Network Rail, which is controlled by the industry's "stakeholders" but financially backed by the state. Hence, since the abolition of British Rail we still have a structural separation between those responsible for the track and those who run the trains. However, the Government has a lot more control than before over the system.

What is the solution?

Mr Grayling believes that "a much closer integration" of the organisations that run the track and the trains would mean a simpler chain of command and faster decision-making.

One possibility would be to award franchises to major train operators, which would include a duty to look after the tracks and signalling in their areas - thus abolishing Network Rail. Another might be closer working between the infrastructure organisation and train operators. A further option would be to integrate the trains and track in some areas - such as Scotland - but not everywhere.

The Tory's transport spokesman takes issue with the short-term, seven-year franchises currently awarded to train operators which, he believes, inhibit long-term investment. He argues that the 20-year licence awarded to Chiltern - the longest given on the main network - has enabled it to upgrade its service and expand Marylebone station.

What does the industry think?

Essentially, the big train operators like his ideas, but Network Rail does not. Train company chiefs have accused Network Rail of wasting "billions of pounds" because the infrastructure company escapes the kind of competitive pressures faced by operators. David Franks, chief executive of the train division of National Express, says the state-backed network company's battle with the rail regulator over costs is nowhere near as demanding as the stringent disciplines applied to bidding for franchises.

The National Express chief's comments came in the wake of a bid by Network Rail for £29bn of funding for the next five years. The infrastructure organisation is seeking £8bn to upgrade the network. Mr Franks argues that at least one major train operator should be allowed to take over responsibility for the infrastructure in its area in order to provide a financial "benchmark". He points out that Merseyrail, which is responsible for issuing franchises in its region, believes it could save £33m if it took over the infrastructure from Network Rail.

Network Rail demurs. It argues that it has already taken measures to integrate wheel and rail by establishing "integrated control centres" where train operators and Network Rail staff sit together to manage the network. Joint "performance improvement plans" have also been produced for each route. John Armitt, Network Rail's chief executive, said: "It is difficult to see what could be achieved by a fundamental restructure of the industry with the upheaval and uncertainty that would result."

What are the main worries?

Just about any structure can be made to work because the people in the industry will try and make it work. It's a question of how well. There are problems with allowing one train operator to control a route used by other operators and freight companies. At the moment, the division of responsibilities between train companies and Network Rail is policed by administrators and lawyers. The same people presumably would have to monitor the relationship between a train operator that controls the track in a certain area and other operators whose services used it. Some parts of the West Coast route, for instance, are used by five different operators.

What about a return to British Rail?

The main advantage of a single, state-owned system is that it involves one chain of command. There is never any doubt as to who is responsible for operational shortcomings. By its nature such an organisation would also be immediately responsive to the wishes of a democratically-elected government. The disadvantages are the perceived inefficiencies of a state-run enterprise, the problem of constant ministerial meddling and the extreme reluctance of the Treasury to countenance any significant capital investment.

One way around the financial problem would be to grant a resurrected British Rail the ability to raise its own funds through issuing bonds. The Treasury - always concerned about increasing public sector debt - would have to be told that long-term investment in the rail system is more important than short-term concerns in City dealing rooms. Neither Mr Grayling nor the Government however, will be considering this option.

Will the Tories' new plan for the railways work? Yes...

* The present split between train operation and track maintenance leads to confusion.

* Re-introducing the profit motive for companies overseeing the infrastructure will aid efficiency.

* Longer-term franchises will lead to longer-term investment.

No...

* There would be clashes between companies that run trains and maintain tracks with other operators who want to use the same track.

* Re-introducing the profit motive could result in lower safety standards.

* Longer-term franchises will lead to complacency.

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