How do you fix a problem like rail franchising?

What to do? How to fix a broken railway?
The answer rather depends on how broken you think the railway is. It’s caught many headlines and, yes, it has made many people’s lives a misery since timetables changed in May at Northern and Thameslink.
Elsewhere trains continue to run and Network Rail continues to operate, maintain, renew and enhance the network. There have been delays resulting from the hot weather we’ve otherwise been enjoying. It’s led to speed restrictions to reduce the risk of tracks buckling as rails expand in the heat (their temperatures have topped 50oC in places). It seems to have adversely affected Hitachi’s IEPs running on Great Western. Whatever the reason, hot weather delays trains.
East Coast services between London and Scotland now run under London North Eastern Railway rather than VTEC. The transfer went without a hitch. Teams from various companies have been finishing their bids for West Coast and thrashing out their ideas for Midland Main Line services. They bring their own ideas to satisfy the DfT’s demands for better services and have VTEC’s financial miscalculations as an example of what can wrong.
Meanwhile, there’s plenty of pressure from politicians on the DfT to strip Govia Thameslink Railway (GTR) of its franchise. Readers will know that GTR has a management contract with DfT rather than a franchise and with this contract comes tight control by the DfT, which pays GTR a fee to run trains and receives all its income in return. With this tight control comes little point in stripping GTR of its deal. Ministers might consider that GTR’s presence keeps some of the heat off them in a way direct control would not. Then again, the roasting ministers receive from MPs and others might persuade them they couldn’t be worse off.
The fundamentals of a railway that governments specify and private companies deliver isn’t broken. But it doesn’t work if governments accept unrealistic bids. Nor does the railway work if governments set Network Rail unrealistic goals. The key is realism. And realism depends on knowledge and experience.
I doubt some of those advising ministers have sufficient knowledge and experience. And those that do must fight a civil service mentality of preferring to tell ministers what they want to hear rather than what they should hear.
None of which reduces pressure on ministers to do something. Transport Secretary Chris Grayling has already overseen Network Rail’s appointment of Andrew Haines as chief executive. Haines is unique among NR chief executives in having run a railway. Departing chief, Mark Carne, for all his qualities could not bring this but he had a tough chief operating officer in Phil Hufton. Unfortunately, Hufton is absent ill and insiders tell me that his absence is noticeable in performance figures.
Not that performance features particularly highly on NR’s list of things to deliver. Look at Scotland and NR’s scorecard reveals that ScotRail punctuality comprises only 10% of NR’s overall score for the country, competing with safety, finance, investment and asset management. Of course, all these factors have their place and I’ll admit that it’s fiendishly difficult to separate and rank each of them. But when you consider that Anthony Smith at Transport Focus never tires of saying that passengers’ top three priorities are punctuality, a seat and value-for-money, is 10% enough?
Take a look at NR’s scorecard for London North Eastern and East Midlands route and you’ll see that GTR’s delay minutes form just 1% of its overall weighting. At least for this route, train operator performance accounts for 40% of the total weighting, chiefly because it has several large operators such as Northern, East Midlands and LNER. Each accounts for 8% of the total.
But back to ministers. They could split Network Rail’s System Operator into an independent body. When I interviewed Managing Director Jo Kaye last November, she argued that it was not yet time but admitted that as Britain saw more infrastructure managers as well as NR, it could eventually become independent.
The System Operator has caught much of the criticism for failing to produce timetables for Northern and GTR in sufficient time even if the root causes were late decisions by the DfT and late electrification by NR. Standing as an independent body might allow it the space to warn of the consequences of late delivery. It could better advise on strategic capacity improvements from a position of independence.
I might have suggested putting it under the Office of Rail and Road’s umbrella had that body not lost its voice over recent years. It could have formed a third part of ORR’s rail work, standing alongside its economic regulation functions and its safety arm (the part of ORR that does have a voice with its chief inspector, Ian Prosser).
Ministers should split DfT’s franchising functions to leave the department doing policy and the franchising body procuring. It might even put franchising and system operator under a single roof but this combination would need to be very transparent if it’s to gain trust from train operators.
Splitting franchising would be to admit that DfT career civil servants are not the best people to design and deliver franchises. The new body would need to be staffed by people with experience of running railways from train and track backgrounds so that they grasp the art of the possible. But they should not be its entire staff because it’s important that railways move forward and pressure from franchising competitions does force bidders to rack their brains for new ideas.
The move would force ministers and their civil servants to step away from close control of rail. When you’re vexed by daily complaints, this is hard to do. But once rail recovers from its timetable meltdown, it will be the right thing to do. It will allow ministers to properly hold the railway to account without also being complicit. Who knows, one day transport ministers might be statesmen.

This articles first appeared in RAIL 857, published on July 18 2018.

Whitehall is pushing rail down the wrong track

Any pamphlet entitled How to be a minister is likely to have a limited audience. But that hasn’t stopped the Institute for Government with its latest primer on taking infrastructure decisions.
It’s a complex area with responsibilities divided across eight government departments (each with a cabinet secretary of state) and 18 ministers under them (and that’s just the UK government, in Scotland and Wales there are more departments and ministers looking at infrastructure).
Rail infrastructure sit most clearly under the Department for Transport but four other departments have their fingers in rail’s pie. The Treasury controls money so has huge influence over Network Rail and big spending projects such as Crossrail and High Speed 2. The Business, Energy and Industrial Strategy (BEIS) department is responsible for policies surrounding the rail supply chain. The Ministry of Housing, Communities and Local Government holds some responsible for High Speed 2 and the Northern Powerhouse. Finally, the Cabinet Office oversees the Northern Powerhouse and Midlands Engine.
Nothing can be done in isolation and nothing can be done simply. Almost by definition, major projects cut across several areas and will provide benefits and cause harm to different degrees to different populations.
As the institute notes: “Ministers should appreciate the uncertainties, risks and assumptions that underpin the evidence presented to them. They should be aware that cost benefit analysis is more than a single, monetary figure: the analysis should produce a range of benefit-cost ratios that a project is likely to achieve, their relative likelihood, and a summary of impacts that cannot be monetised but should still be taken into consideration. This should be backed up by sensitivity and scenario analyses, which highlight the assumptions underpinning the results and what would happen if these assumptions changed. It should clearly outline the risks remaining and what steps need to be taken to manage them.”
Ministers need to understand the evidence for a project and be able to clearly explain their decisions. I’ve quizzed a few ministers over the years and, in general, they are far better at explaining decisions than the bland statements their press offices produce.
Of course, there’s a balance between ‘rolling the wicket’ to create favourable conditions for a certain project and announcing that project. Ministers should be atop their rollers before the full costs, benefits and harm of a project are known but they should smartly and openly dismount if projects fail to reach their early promise. There’s a real risk in announcing something before its costs are settled as shown by the Great Western electrification project.
Its £1.1 billion go-ahead came from Prime Minister Gordon Brown back in July 2009 (RAIL 623, 624), aided and abetted by his transport secretary, Andrew Adonis. Both lost office within a year but David Cameron’s coalition government took the project forward. However, its cost estimates proved woeful, bills spiralled upwards, delivery dates came and went and parts were lopped from the project. Today, nine years later, the project is still not complete with electric trains only running to Didcot, far short of their Oxford, Cardiff and Bristol targets.
The rail industry had been rolling its electrification wicket, slowly convincing ministers to change their department’s position. It changed very dramatically, not just with Great Western’s announcement, but also with 2012’s High Level Output Specification that proposed a massive electrification programme to be delivered in 2014-19.
Once again, it was a prime minister that announced the plan in July 2012 that would see the Midland Main Line electrified, and wires for a freight link between Southampton and the West Midlands, Cardiff Valleys and over the Pennines (RAIL 701).
It was heady stuff but also more than the railway could deliver. I recently asked an old Network Rail hand why he thought government had jumped at so much electrification. “Shiny things,” he said. But he added that NR had advised that the programme by delivered over a decade rather than five years. Ministers ignored, or didn’t hear, this advice. Had they taken it, then it’s likely the railway wouldn’t be in today’s electrification mess.
The Institute for Government comments: “Yet ministers continued publicly to state their commitment to electrification, locking themselves and their successors into targets that were very unlikely to be achieved. This has reduced the credibility of ministers and damaged government relationships with regional government, mayors and industry.”
There’s much ministers can do to cut across Whitehall’s silo mentality. They are more likely to know their opposite numbers in other departments than are civil servants. This should result in policy implementation being better co-ordinated. The institute’s pamphlet sums this up in a quote from former minister, Ed Vaizey: “It struck me as really odd, for example, that the Department of Transport was in charge of getting wifi onto trains when all the expertise about doing that effectively rested in my department… there were huge opportunities for synergies which were lost.”
Meanwhile former Transport Secretary Alistair Darling noted: “As in everything else in life, there is no substitute for sitting down over a cup of tea or a drink and discussing something. But you then need to have some formal proceedings to make it happen.”
There are examples of departments working well together. DfT’s Crossrail project created a tunnelling academy to develop skills knowing they were very likely to be needed for several other schemes including HS2, Thames Tideway tunnel and Crossrail 2.
Rail now stands on the brink of the next five-year control period. NR’s funding will concentrate in operating, maintaining and renewing the network. Enhancements have been removed in a change from previous control periods. They will now be put through their own development pipeline with only properly developed and affordable proposals receiving funding. That’s a reasonable reaction to the time and cost overruns seen on Great Western.
The same policy applies in Scotland but there it divides from England and Wales. Scotland has published the rail industry’s initial advice to ministers on what problems need enhancements to fix them and what potential fixes could be delivered. DfT meanwhile has kept this advice secret and seems keen to prevent passengers and stakeholders knowing what might be done to fix overcrowding or poor punctuality.
Secrecy is increasingly this UK government’s preferred way of working. It prevents people clamouring for particular projects, which makes life easier for ministers, but also prevents any ‘wicket rolling’. By the time DfT launches any public consultation, there’s usually only one option on the table and there’s rarely evidence to show that this is the best option.
It smacks of Whitehall knowing best which contrasts sharply with the devolution government professes to support. DfT should be more open about the problems the railway faces. It should be more open about potential answers. Some may be unaffordable but openness allows these problems to be discussed. Ministers have more chance of convincing passengers of the difficulties of solving overcrowding, for example, if they engage in the debate.
Instead we have vacuum. Network Rail has sent its Trans-Pennine upgrade report to the DfT. It remains unpublished while civil servants pore over it. It would be better published so that people can see how the route could be upgraded and at what potential cost. NR doesn’t have a monopoly on right answers and publishing its report provides an opportunity for suppliers and contractors to comment to refine and sharpen the report’s proposals. Publication allows passengers, train operators and local businesses to comment on what’s important to them, further refining and sharpening its plans.
Few disagree that ministers retain responsibility for public spending. Decisions about using that money to upgrade the trans-Pennine route remain with them. Publishing NR’s report is not a commitment to implement its recommendations. But it will show that the DfT and its ministers are serious about improving the route.

This article first appeared in RAIL 858, published on August 1 2018.

Uncertainty beckons for rail franchises

Change is coming to rail franchises. Quite what is open to question.
Until now, franchising has been relatively simple. The Department for Transport or Transport Scotland runs competitions for a group of services roughly along the lines of the train operating units created by British Rail in the run-up to privatisation. They score bids on the ideas they contain and the premium offered or subsidy needed. The winner then runs trains for a set period.
In general terms, this system has worked. In the 20 years since privatisation, four franchises have failed. The problem is that three of those failures were running inter-city services on the East Coast Main Line. Two failed because the winning operator didn’t attract the growth it thought was there.
Hard then to blame Transport Secretary Chris Grayling for saying he doesn’t want to franchise East Coast in the same way again. After all, that’s one of the definitions of madness.
No-one knows what he does want to do although he told MPs in late July 2018 some of his initial ideas: “I think there are benefits from public-private partnership. We are not intending to sell off this railway lock, stock and barrel. Its future will be as a public-private partnership. It will not be a fully private company outside government with no state involvement at all. My aim is that it should be public-private partnership but in a different form than has taken place up to now. The example would be bringing in private capital to invest in digital signalling as part of the partnership, and an employee stake in the business. These are the things we are working through now.”
He admitted that East Coast was not the ideal place to try creating a track-train partnership. Current train operator, LNER, is a minority user of the route, which is a busy mixed-traffic railway. Thameslink and Great Northern (both part of GTR) run outer and inner-suburban trains at its southern end. (Grayling talks about switching Great Northern services to be part of LNER.) East Midlands Trains scoots between Peterborough and Grantham. North of York, there are plenty of CrossCountry and TransPennine Express services. The line is a key route for freight operators too.
Putting LNER in the driving seat on a line so many operators depend upon will need many safeguards for those other operators.
But Grayling is pursuing his ideas because circumstance has returned LNER to the public sector. “It is common sense that the more we can integrate the teams so that they work together, the more likely the railway is to be able to respond properly to the challenge it faces. What we have to establish with the east coast partnership is exactly what form it should take legally. What I really want on the east coast is somebody in charge able to take decisions about planning maintenance works alongside the interests of passengers and to make sure that the two fit side by side, and dealing with problems when they arise so that services get back to normal as quickly as possible. It is about creating a joint approach to the running of the railway, given the pressures on it,” he told MPs.
Knitting track and train together will need Network Rail to trust its local managers more than it has to date. It has talked about devolution but remains very centralised. Not least with its Infrastructure Projects (IP) division that has been responsible for many problems in recent years. It was behind the engineering overruns that blighted passengers at King’s Cross and Paddington a couple of years ago. It’s behind the years-late project to electrify the line between Manchester, Bolton and Preston. It’s centralised but leaves local teams to cope with the problems it brings.
Driving devolution will sit high on Andrew Haines’ agenda when he becomes chief executive later this summer. Grayling told MPs: “The devolution of Network Rail from a centralised organisation to an organisation of devolved route-based businesses is the essential next step to paving the way for them to create the kind of partnerships the railway needs for the future.”
Haines will need to drive improved performance because there’s a sting on the tail of public-private alliances, such as Scotland has. Under ScotRail Alliance sits ScotRail as train operator and Network Rail Scotland as infrastructure provider. When trains fail, ScotRail gets the blame. When signalling or other infrastructure fails, ScotRail Alliance gets the blame. In other words, the train operator’s name features for failures of track and train while Network Rail isn’t mentioned. This perpetuates the feeling that NR’s idea of an alliance is that the train operators take the flak.
If Grayling takes forward LNER as the name of his proposed partnership between East Coast’s inter-city train operator and the Network Rail routes, he will create a situation where NR can perform badly with no risk to its reputation. And that’s the only risk that has any relevance because there’s no point DfT fining its subsidiary for poor performance. Private partners will find that ‘heads NR wins, tails train operator loses’ set-up a tough sell to their boards and shareholders.
NR’s alliance with South West Trains failed when the two sides couldn’t agree about money. Civil servants rightly become twitchy at any hint of public money leaking into private pockets. Nor is it reasonable to expect a train operator to subsidise the public side of an alliance beyond what is formally contracted.
Grayling admitted the difficulties of exposing the private sector to NR’s infrastructure risks: “The truth is that the train operators we have at the moment do not have balance sheets that are big enough and strong enough to start taking significant infrastructure risks. The state and/or Network Rail have to stand behind them. However we shape things for the future, it is difficult to see any private entity taking on to its own shoulders the risk of failure of a Victorian rail infrastructure. Whatever happens, the state is going to play a role.”
He continued: “It is not privatising the whole lot. I would not seek to privatise the infrastructure again. The state has a role and will continue to have a role. The state brings strengths and the private sector brings strengths. If you weld them together in a joined-up railway, you probably have the best way of running a railway in today’s world and dealing with its very real operational challenges.”
Alliances expose the difficulties of customers and suppliers trying to act as one. Welding them together, to use Grayling’s phrase, suggests that his civil servants will need to look at how train operators pay NR. Currently, NR receives most of its money from its grant from government and the fixed charges that train operators pay. Operators also pay comparatively small variable charges that depend on the type and number of trains they run.
This means that adding extra trains adds little extra to operators’ bills and the extra train that pushes track capacity to its limit provides little extra income to add to that capacity. Prescriptive franchise contracts mean that train operators can’t cut quiet trains. Britain’s busy network has costs and trains fixed with little room for anyone to manoeuvre.
If Chris Grayling is to look at new public-private partnerships, he should expand his examination to look at the wider problems of funding and using the railway. Privatisation changed everything in the 1990s. Two decades later, it is time to look again. Grayling has pledged to keep NR in the public sector. That at least fixes one piece of the railway jigsaw. But even a public NR might increasingly rely on the private sector for some of its core functions. Signalling, for example, could see its interlocking moved to a remote computer as a leased ‘cloud’ function. Infrastructure Projects could become an independent arm of NR, competing with private companies for work that devolved route managing directors specify. System Operator’s long-term strategic planning and short-term timetabling functions demand some independence from the rest of NR.
Whether Grayling and his department has the capacity for such a radical review remains to be seen while the government remains fixed by the problems of Brexit. That suggests his public-private partnership idea will become a sticking plaster rather than a considered look that could endure for another two decades.

This article first appeared in RAIL 859, published on August 15 2018.