I see George Osborne, next March, handing a new transport secretary the job of setting up a Strategic Rail Authority

 

“It’s déjà vu all over again”. What else can I say.

Problems on the railway followed by the secretary of state dragging in some bigwig, in this case Dame Colette Bowe, to study what went wrong; his announcing a small change – Network Rail grants funneled via the TOCs – as a solution; and his calling in Nicola Shaw to help plan a rail restructuring, for the second or third time in her career.

Where, you might ask, is this likely to end up: breaking up Network Rail, bring in private capital, or nothing?

My colleague Mr Grumbles says that something is going to change. Status quo is not an option. George Osborne would not have got Nicola Shaw to start a review if things were going to stay as they are.

I am going to argue here that what we are heading for is a revival of the Strategic Rail Authority, something we had from 1999 to about 2004, but with differences.

I will do so by looking at each of the people involved and working out what is likely to on their minds.

First, Dame Colette Bowe. Being a former chair of Ofcom, she is likely to conclude that better or different regulation is the key. This would be a mistake. The Office of Rail and Road is a side issue. She ought to conclude that while the Department for Transport is well able to set the HLOS, the high level output specification, it has a very limited capability for taking a strategic view on the deliverability of detailed schemes: wide scale electrification and the freight electric spine, for example.

Neither DfT nor Network Rail are doing proper strategic planning of the delivery of a better railway. It is just one thing added onto the one before.

We come next to Richard Brown, a most influential character. The former Eurostar chairman has been recommending for a while that franchising and suchlike things should be moved out of the department and into an executive agency. This hasn’t happened. He was also, I recall, strongly supportive of  John Prescott’s decision to set up the Strategic Rail Authority, which I am sure he has not forgotten.

Now consider Sir Peter Hendy. He and Mark Carne have been instructed, as it says in the budget red book, to have Network Rail devolve power to route manager directors (RMDs). In a parallel move, the government will pass public money for Network Rail through the train operating companies in the form of track access charges. The position of RMDs, with power devolved to them and being the recipients of track access charges, will be immensely strengthened. They and the TOCs who they deal with every day could form a powerful local alliance. It is tempting to see this as something which could be privatised, but I am sceptical.

Going back to Peter Hendy. Where does he come from and what has made his career such a success? It is heading up Transport for London, a large, fully functioning, local government agency. It serves passengers directly and is answerable to an elected politician.

He is bound to pour cold water on any claim that private capital in the railway will solve its problems. If you doubt that just contemplate Tube Lines or, worse, Metronet. He is not going to let the private sector loose on vast ill-defined railway projects. Consider Crossrail; it is a project proceeding well under close management by a government agency, TfL and DfT.

You would expect that Peter Hendy would think that the best way to run a railway is to have a properly staffed organisation given full responsibility to deliver rail services to the public: letting TOC franchises, the oversight of Network Rail, and the planning of routes and upgrades, all subject to political direction. In other words, a TfL of the railway.

You would also suppose that he would be very comfortable with regional devolution, particularly in the light of what is said in the budget red book. Herewith some extracts:

The government is committed to significant transport devolution in all of the country’s city regions that elect a mayor, as well as the country’s counties.

The government is launching an ambitious new transport devolution package for the North to take the Northern Powerhouse to the next stage and create a single northern economy that is genuinely stronger than the sum of its parts.

The government will establish TfN (Transport for the North) as a statutory body with statutory duties to set out its transport policies and investment priorities in a long-term transport strategy for the North, underpinned by £30m of additional funding over three years to support TfN’s running costs and enable them to advance their work programme.

The government will work with TfN to push forward plans to transform east-west rail and road connections via TransNorth and options for a new TransPennine Tunnel, with a prioritised list of scheme options to be produced by Budget 2016, and an interim report in time for the Spending Review later in 2015.

Finally consider Nicola Shaw. Here things become interesting. She has “history”. She was chief operating office at the SRA under Richard Bowker at the time that Alastair Darling, the secretary of state, was looking at different structures for the railway. The final choice before the 2004 white paper came down to three: a DfT-led railway, the hybrid, which is what we got, and Bowker Rail.

In a letter railing against Darling’s reforms Bowker said: “To deliver anything in the modern context requires highly objective, smart and effective client management.” He argued that the hybrid structure – which Darling planned to create – would not do this.

How right he was. Our hybrid structure does not do client management.

What Richard Bowker wanted, and presumably Nicola Shaw did too, which is why it is interesting, was a fully functioning executive agency outside the DfT, able to plan and manage the entire railway, subject to high level outputs set by the government. In other words he wanted a Strategic Rail Authority, but one able to deal directly with Network Rail without finding the rail regulator getting in the way, as Tom Winsor had done.

Hendy, Shaw and Brown are all likely to favour the creation of a strategic rail authority.

This would not be too difficult to bring about. It would require curtailing much of ORR’s role – so we don’t have two bodies doing the same thing – pulling franchising out of DfT and pulling route utilisation and other planning work out of Network Rail.

It could be, and this would be ironic, that with Hendy in charge and an arms-length relationship between the routes and the centre, you could see a reformed “Network Rail Central” becoming that strategic rail authority. It is, after all, accountable to the secretary of state. All it lacks is the franchising role.

A strange turn of events indeed – who knows? It is a funny old world.

This does not bring private capital into the industry, which some people want, but I cannot see another round of privatisation taking place. I tried out the idea on my friend Antonia over supper last night and got a very firm reaction.

“If they want to win the next election”, she said, “the conservative party had better leave the NHS alone and had better not privatise the railway – AGAIN! I am sure they want to get £38bn off their balance sheet but who’s going to buy a company with £38bn of debt? Tell me that! Canadian pensions funds – pah!”

Rather well put I thought.

Someone I spoke to has pointed out that nothing is likely to change soon. Our current secretary of state, Patrick McLoughlin, is not very interested in the day-to-day railway. He has airports on his plate, and HS2 – both more important than reorganising the railway – and roads. He got his roads bill, with money, through last December. Rail is really number four on his priority list and he won’t spend time pushing through any formal reorganisation.

However, Nicola Shaw is not due to report till next March, so McLoughlin can remain uninterested. There will be someone new by then, and a strategic rail authority will be put on their desks in the 2016 budget statement to deliver.

 

BOWKER’S VIEW

Extract from Richard Bowker’s letter to the secretary of state in 2004, taken from Britain’s Railways, 1997-2005 by Terry Gourvish:

No one can be both client and contractor, both judge and jury. Offering a major supplier, for that is what Network Rail is, the opportunity to tell you what they’d like to sell you, as opposed to telling them very precisely what you want to buy and then managing the delivery of such,
is to abdicate responsibility.

Network Rail is a monopoly supplier, and moreover one which is problematic to manage. No doubt it will be argued that the proposed model shows government specifying the output to be delivered but examination of the documents we have seen shows this to be very high level and rather detached with Network Rail taking the lead on a great deal of client work.

This will result in production-led planning, lack of customer focus and increased costs and will be horribly reminiscent of the Marsh-led British Rail of the early 1970s. Every ounce of my knowledge of this industry in practice tells me that the delivery of anything in the modern context requires highly objective smart and effective client management.

 

OSBORNE’S VIEW

Extract from the Budget Red Book (July 2015):

As problems at Network Rail have become clear, the government has acted to put the rail investment programme back on track.

Specifically, the government has appointed Sir Peter Hendy, formerly the commissioner of Transport for London, as the new chairman of Network Rail. The government has asked Sir Peter to bring to bear his experience and expertise and do what is necessary to ensure Network Rail can deliver effectively and operate the railways safely, and in particular to report by autumn 2015 with a plan to get the rail investment programme back onto a sustainable footing.

The government will also take further action to improve incentives and drive improvements in Network Rail and the wider rail industry:

The government has asked Sir Peter Hendy and Mark Carne, chief executive of Network Rail, to continue with the work started to devolve more power to route managers closer to the front line, so that the railways are more focused on delivering what passengers need and to drive comparative benchmarking of the efficiency and effectiveness of individual routes – to drive up performance across the network.

The government will also change the way it channels public money through the industry, directing it through the train operating companies, so that Network Rail focuses firmly on the needs of train operators, and, through them, passengers – this will put the customers of the railway back in the driving seat in demanding efficiency and improvements that matter to them, making the best use of scarce capacity on the rail network.

Looking further ahead, the government has also asked Nicola Shaw, chief executive of High Speed 1, to advise the government on  how it should approach the longer-term future shape and financing of Network Rail. Nicola Shaw will work closely with Sir Peter Hendy in conducting her work, which will be concluded before Budget 2016 [probably next March].

 

This article appears inside the latest issue of Passenger Transport.

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