Chris reflects on the new Shapps-Williams plan to reorganise the railways. He notes that the logo and typeface for the new organisation have already been chosen and wonders what that says about future decision-making in the industry.
You can imagine the conversation, can’t you? The naming of the new organisation. The need to avoid reviving names that are associated with failure, like the Strategic Rail Authority or (God forbid) Railtrack. Using the word “British” sends a strong signal to all those Leave and Red Wall voters, whilst also reminding all those nationalists and devolutionists in Scotland and Wales who pays for their trains. Surely another reason to save the Union. “Railways” is good – simple, does what it says on the tin, avoids formerly trendy words like “Network” or “Rail”. Then comes a Churchillian growl from the corner of the room. “Great,” he says. “Yes, PM, it will be,” comes the hurried reply. “No,” the voice growls, “That’s what we should call it. Great British Railways.”
Thus, in all its absurdity and with a Johnsonian flourish, the new organisation is named. Meanwhile, in another corner of the room, a plaintive voice speaks up. “What about me?” Sidelined by the PM’s enthusiasm for models at the announcement of the National Bus Strategy, Grant Shapps is discontented. If he doesn’t speak up now, the reform will for ever be named for some bloke from the Post Office, and the Transport Secretary won’t be remembered at all, apart from being the guy who spoils everybody’s summer trip to Benidorm (the Shapps Axe, perhaps?). “Yes, yes, all right,” the PM says. “We’ll call it the Shapps-Williams Plan. How about that?” Of such trivia is history made.
Apart from the name of both the White Paper and the new organisation it will spawn, there was very little in the announcement that was a surprise. The plans entail an end to the franchising model created by the 1993 Railways Act, the transfer of revenue risk back to the State (score one over Rishi for that – the Treasury’s opposition to that aspect caused a few problems along the way) and the creation of a single guiding organisation.
Interestingly, the single organisation idea was an option considered quite seriously in Alastair Darling’s review in 2004 and pushed for by the then SRA chief Richard Bowker. However, that was seen as a power grab by Bowker, and in any case would have entailed bringing Network Rail into full public ownership, something that would not be countenanced by Gordon Brown. After all, he’d gone to such trouble to keep the railway’s debts off the public sector balance sheet during the Railtrack debacle a couple of years earlier.
Once it had been acknowledged in 2014 that Network Rail was in the public sector after all, and that the DfT needed to end its direct rule of passenger rail franchising (which had hardly been blessed with triumphant success), then the logic of merging the two functions became irrefutable.
The announcement was greeted more with relief than anything else. The idea seemed logical and rail franchising had never been popular in the first place. It is generally acknowledged that the system did deliver some significant benefits for the railways (not least more than doubling the market) but that it had buckled in the last few years. The problem was driven by several issues, including failures at Network Rail (the Great Western electrification and the 2018 timetable debacle are cited in the White Paper). Less often mentioned are the DfT’s own inflexibility (about which I’ve written before) and tendency to micro-manage. The decade-long collective failure to grasp the pensions nettle did not help, and in the end drove some of the main players out of the market altogether. At least that particular hot potato is firmly back in the Treasury’s court (another cause of discontent for cash-strapped Rishi, one suspects).
However, proponents of full renationalisation have fallen short of total victory. The private sector will still be involved in train operations through the letting of new Passenger Service Contracts. Indeed, the White Paper promises that there will be “new opportunities for innovators, suppliers (including small and local partners) and funders will be created through streamlined contracts and more contestability”.
The removal of full revenue risk from the equation may offer the chance for smaller companies or management teams to bid for smaller contracts – without the need for the large capital injections or parent company guarantees which gradually reduced the number of bidders in the franchising market. We may get another GB Railways or Prism Rail entering the industry – whilst the possibility of smaller operating contracts may yet revive the idea of “micro-franchising” for local and rural lines.
However, that is not to say that the new contracts will be risk-free. Far from it. The White Paper identifies five areas where operators will be rewarded and/or penalised:
- Quality of Service
- Running the trains on time
- Passenger experience
- Revenue protection
- Train capacity
In addition, there will be “scorecard linked incentives” for collaboration and innovation as well as revenue incentives and risk-sharing designed to incentivise growth in passenger numbers and revenue. It may be me, but monitoring that little lot feels complex and expensive.
More complexity is added, too. Greater flexibility is promised as passenger numbers recover, including “the possibility for operators to act more commercially on some services, when this is the most value for money option and it is financially sustainable for the operator to take on these responsibilities. As that happens, operators on those routes, predominantly the long-distance ones, will be able to make more decisions including setting more of their own fares and taking more revenue risk.” Whisper it quietly, but that starts to look more like a franchise to me – but the words may in reality be more about creating some revenue upside for the Treasury and keeping the competition authorities onside.
One of the central planks of the original railway privatisation was the need to attract private sector capital to fund investment in the network. Despite a good deal of enthusiasm in the City, the industry never quite managed to develop the right structures to enable this to happen. Chiltern’s Evergreen investment programme was a pioneer, though it was not without its problems. Now, more attempts are being made with the East-West Rail project and the latest plan for Heathrow southern access. Hopefully, GBR will make this a priority since, clearly, government funds are going to be in short supply for the foreseeable future.
Interestingly, the system envisages that Open Access Operators would remain in place, and the White Paper promises to honour existing Track Access Agreements.
On fares, the White Paper again promises the introduction this summer of flexible season tickets offering eight days’ travel in any 28, but it has become clear that – as I warned in my article in the December issue – there is little room for generous discounts. In media interviews on the day of publication, Transport Secretary Grant Shapps specifically avoided making promises about future fare levels, pointing out that the industry had received £12 billion in Covid-related public support over the last twelve months.
As the new plan makes clear in a number of places, there are great uncertainties about whether and when passengers will return to the railways. Demand has risen since the partial reopening of the economy in mid-April but is still at or just below 40% of 2019 demand, whilst car traffic is running at over 90%. The days of peak commuting five days a week are over, the DfT believes, so the immediate task is to keep the railways running and make sure that they’re fit to cope with the modal shift that is planned over the next twenty years on the road to Net Zero.
Meanwhile, it’s back to the sixties as BR’s double arrow logo and Rail Alphabet typeface make a major comeback throughout the White Paper and as the public face of the new organisation. Maybe the fact that such decisions are being taken by Government ahead of the legislation that sets it up says something about the priorities of those involved. I’ll leave that to you to judge. But remember, whatever happens, it’s going to be great. OK?
First published in Rail Professional magazine.